ASIC has imposed conditions on the Australian credit licence of United Financial Services Pty Ltd (UFS), a finance broker specialising in arranging loans for motor vehicles.

This follows an investigation by ASIC into suspected loan fraud concerning loans submitted by UFS that secured car loans totalling more than $7.8 million in the 18 month period prior to November 2014.

The suspected fraud involved a used car dealership in the Sydney area using false payslips that overstated the consumer’s income when providing documents to UFS when it was arranging credit for the consumer. The false payslips were then submitted by UFS with applications for car finance to the Australia and New Zealand Banking Group Limited (ANZ).

ASIC was concerned that UFS was not complying with its obligations as an Australian credit licensee under the National Consumer Credit Protection Act 2009 to make reasonable inquiries about a consumer’s financial situation, and to verify matters such as their income and expenses.

ASIC was concerned that UFS failed to have adequate risk management systems in place to detect the fraud in a timely and effective manner, with this failure meaning the submission of loans with false documents continued undetected by UFS for over 18 months.

ASIC acknowledges the co-operation of UFS in its investigation.

ASIC Deputy Chairman Peter Kell said, ‘Brokers and lenders should be alive to the risk of fraud, and verification processes should be designed to ensure that fraud can be detected in a timely manner.

‘Brokers and lenders will not meet their responsible lending obligations by using unreliable verification processes.’

The licence conditions will require UFS to appoint an independent consultant to review its arrangements to comply with its general conduct obligations under the National Consumer Credit Protection Act 2009, specifically its procedures for:

• monitoring and supervision of UFS representatives; and
• verifying the financial situation of the consumer.

The independent compliance consultant will report to ASIC and UFS will be required to address any deficiencies identified by its review.

ASIC’s investigation into the suspected fraud is continuing.

Background

UFS is a credit services business, specialising in the delivery of consumer and commercial finance, including car and personal loans, and insurance products.

Regulatory Guide 209 Credit licensing: Responsible lending conduct (RG 209) sets out ASIC’s expectations concerning responsible lending obligations.