The corporate watchdog is suing Australia’s oldest bank, after uncovering a subsidiary’s systemic misconduct in home loan approvals.

The Australian Securities and Investments Commission has brought legal action against RAMS over multiple breaches of consumer credit laws, including staff fabricating fake payslips to fudge customer eligibility for loans in the hunt for commissions.

RAMS, a wholly-owned subsidiary of Westpac, has admitted to the misconduct.

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ASIC has alleged RAMS did business with unlicensed referrers, failed to supervise representatives and had breached consumer credit laws through lax policies and procedures.

“This is a systemic organisational governance failure by RAMS who did not adequately supervise its franchise network,” ASIC Deputy Chair Sarah Court said.

“’RAMS franchise staff were found to have submitted false pay slips from non-existent employers and altered customers’ liabilities and expenses to enable them to meet serviceability requirements to get the loan application over the line.”

In another example, a RAMS franchise employee was found to be involved in fabricating a fake contract of sale for a home.

Investigation cost $46m

“RAMS allowed years of unlawful conduct to occur across its franchises, creating the opportunity for loans to be provided to customers who otherwise may not have qualified for those loans, and thereby increasing commissions earned by RAMS franchisees,” Court said.

ASIC is seeking civil penalties against RAMS in the Federal Court, and the first case management hearing is yet to be scheduled.

In a statement, Westpac confirmed RAMS Financial Group (RFG) had reached an agreement with the regulator to resolve the investigation

“RFG will continue to work cooperatively with ASIC to resolve the proceedings as quickly as possible,” a Westpac spokesman said.

“Westpac expects existing provisions should be sufficient to meet the financial outcome of the proceedings, subject to court approval.”

ASIC did not flag the size of penalty it would be seeking, but court documents showed the regulator’s 22-month investigation of RAMS cost roughly $46 million.

Westpac closed the RAMS business to new home loans in August 2024, absorbing the $31.8 billion of existing RAMS loans into Westpac’s loan book.

Its customers still access services through the RAMS app, website and call centre.

RAMS had remediated customers who “suffered detriment” due to the misconduct, ASIC said.