Westpac has agreed to the penalty with the corporate regulator following long-standing misconduct within its now-closed RAMS Home Loan business. However, the Federal Court must still determine whether the amount is sufficient to deter similar conduct in the financial lending industry. The misconduct involved RAMS franchisees engaging in unlawful activities that went unchecked for several years due to significant governance lapses.
RAMS, under Westpac’s ownership since 2008, was formally shut down last year following increasing legal pressure and reputational concerns. The regulator pointed to Westpac’s failure to properly supervise its network of franchisees, which allowed unethical conduct such as collaborating with unlicensed persons and accepting direct commissions from customers.
The proposed $20 million fine represents a considerable reduction from an expected $30 million, with Westpac’s cooperation cited as a key reason for the discount. Nonetheless, the presiding judge expressed doubt over whether the reduced penalty would meaningfully influence future industry behaviour, especially since RAMS no longer operates as a separate brand. Westpac has already spent $46 million investigating the conduct in question, with only five out of 70 franchises cleared during its internal review.
The impact extends beyond financial costs. Westpac has taken on RAMS' $31.8 billion loan book and is reportedly seeking to divest the asset entirely. Bank of America is said to be facilitating the sale. Customers affected by the misconduct have received compensation. Still, the episode highlights ongoing governance weaknesses within financial institutions. Meanwhile, Westpac is facing additional issues, including a legal case from a senior risk executive who alleges she was silenced when raising concerns about internal irregularities.
