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BFCSA: Colin Kruger -SMH: Levitt tees off [Sub. 276] ASIC was not impressed.

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Stewart Levitt in the news re ASIC Inquiry Submission No. 276 lodged 29 Oct. 2013

[p4]  "The term, "all politics and public relations", has been ascribed to characterise ASIC's customary performance....The US system of having Senate confirmation hearings for discretionary appointments should be adopted... Applicants with a material history of professional relationships with major players ['actors'] in the financial services industry, should be ineligible for appointment.

The following piece was written by Colin Kruger (Business Reporter, Sydney Morning Herald) and published online on 28 Nov 2013.   

Levitt tees off 

The Senate inquiry into the corporate pup, ASIC, has been getting plenty of attention around Lake Burley Griffin but it seems some submissions have been a little too much for our porn capital.

There is a gap where submission number 276 was made by Levitt Robinson principal Stuart [sic: Stewart] Levitt, who was a big hitter in the litigation against Storm Financial. ”I am somewhat flabbergasted that my Submission No.276 has been removed from the Senate committee website,” Levitt told us.

A committee rep told him it was ”taken down temporarily” to permit redaction or delay, so that others could respond – a courtesy that was not provided to Levitt’s client, Geoff Shannon, ”who was roundly denounced” in Commonwealth Bank’s submission, he says. ”Certainly, I would argue that my submissions were particularly incisive and compelling and must have caused some discomfort within the ranks of ASIC’s senior echelons.”

His submission claimed ASIC’s failures could not be blamed on budgetary constraints, given ASIC’s apparent profligacy in the deployment of public money spent on, or in, outsourcing legal services.

In statements to the media this week, Levitt has called for a federal version of the NSW Independent Commission Against Corruption (ICAC) to monitor the ”corrupt” activity of ASIC.

ASIC was not impressed.

”ASIC completely rejects the article’s inference of corruption,” a spokesman said. ”We apply the law without fear or favour.”

 Mr Kruger’s article can be read, in full, at-------- 

Submissions by Levitt Robinson on the Performance of the Australian Securities Investment Commission

Submission 276:    29 October 2013 -


[Page4] “ASIC has frequently been accused of being soft on the banks, particularly on the Commonwealth Bank of Australia and ASIC's interpretation of its statutory mandate to take "whatever action it can take .... to enforce...... the laws of the Commonwealth" (97), commonly means that it resorts to the line of least resistance with the financial establishment, while targeting 'notorious' individuals.”


[Page9] “In other words, why did CBA receive special treatment from ASIC? That is a question which needs to be analysed, not only in relation to the Storm case but in other matters, too, as this Submission proceeds.”


[Page11] “Clearly, the US Justice Department takes a far more robust and uncompromising view of its statutory duty to enforce and give effect to the laws of the United States than ASIC does with respect to the laws ofAustralia


" No prosecution of any individual employed by any bank arising out of maladministration or for misdemeanours committed during the lead up to the GFC has been brought by ASIC...”


Levitt Robinson Recommendations [amongst others]


[Page 29]  

“Senior positions in ASIC should be internationally and widely advertised - the selection process should be open, transparent and merit-based and so far as possible, senior roles should be filled from the ranks of retired Judges, Senior Prosecutors, Public Defenders, former Attorneys- General, Senior Academics and Senior Lawyers with aConsumer Action background.



"Overseas appointments, particularly from similar jurisdictions, should be favourably considered. 


The US system of having Senate confirmation hearings for discretionary appointments should be adopted. -----Applicants with a material history of professional relationships with major players in the financial services industry, should be ineligible for appointment.”





“ASIC's prosecutorial role should be hived-off to a Corporate and Banking Division of the Office of the Commonwealth Director of Public Prosecutions and ASIC should have no right to engage in "plea bargaining" at any level. Cases, when properly investigated by ASIC, should be referred to the Commonwealth DPP for prosecution and any negotiations on charges or penalties, should be left to the Office of the Commonwealth Director of Public Prosecutions.”




(j) ASIC's - unwelcome and unwarranted incursions into private litigation would be minimised and public resources better deployed in the public interest.


(k) The integrity of ASIC would be fostered and ASIC's history of abject failure as a prosecutor recognised, with the prosecutorial role largely reallocated to the Commonwealth Director of Public Prosecution in a specialist Corporate and Banking Division. 


(l) The importance of protecting small business in the face of corporate failures and promoting the independence and to the greatest extent possible, the integrity of the insolvency profession, would be prioritised, thereby reducing the prevalence of corruption within the insolvency industry and preventing practitioners from acting as the effective servants of banks and other large financial institutions.


(m) Indeed, a complete overhaul of our insolvency laws to bring them in line with the recovery- focused US Bankruptcy Laws, is past due.


The Banking Cabal - subscribers to ‘the Code’


Subject of systemic breach of the Code of Banking Practice (modified May 2004) PDF version (the Code) knowingly breached by [Your Bank] and by, no doubt, all other subscribing Cabal Actors!    -------link to Banks that have adopted the Code of Banking Practice.


Code of Banking PracticeBanks that have adopted versions of the Code of Banking Practice




Bank Code of Banking Practice 2013 Modified Code of Banking Practice 2004 Revised Code of Banking Practice 2003 Code of Banking Practice 1993*
Adelaide Bank Limited (a division of Bendigo and Adelaide Bank as of 1 December 2008)  1 February 2014 4 April 2005 12 August 2003 tick.png
AMP Bank Limited  1 February 2014 10 December 2010   tick.png 
Arab Bank Australia Limited       tick.png 
Australia and New Zealand Banking Group  1 February 2014 16 August 2004 15 August 2003 tick.png 
Bank of Melbourne
(a division of Westpac Banking Corporation as of 25 July 2011, see Westpac Bank)
Bank of Queensland Limited  1 February 2014 6 December 2004 7 October 2003 tick.png 
Bank of Western Australia
(a division of Commonwealth Bank as of 1 October 2012, see Commonwealth Bank)
  1 April 2005 7 September 2006:
Full adoption
19 January 2004: 
Conditional adoption
(a division of Westpac Bank as of 1 March 2010, see Westpac Bank)
  1 June 2004 12 August 2003 tick.png 
Bank of Sydney  10 February 2014 1 January 2012    
Bendigo Bank (a division of Bendigo and Adelaide Bank as of 1 December 2008)   1 February 2014 1 July 2005    
Citigroup Pty Limited  1 February 2014 14 October 2004 5 April 2004 tick.png 
Commonwealth Bank of Australia  1 February 2014 22 July 2004 12 August 2003 tick.png 
HSBC Bank Australia Limited  31 January 2014 5 July 2004 10 May 2004 tick.png 
ING Bank (Australia) Limited  1 February 2014 15 June 2004 3 November 2003 tick.png 
Macquarie Bank Limited  abandoned  abandoned  abandoned tick.png 
National Australia Bank Limited  1 February 2014 31 May 2004 29 August 2003 tick.png 
Rabobank Australia Limited  1 February 2014 22 September 2008   tick.png 
St George Bank Limited
(a division of Westpac as of 1 March 2010, see Westpac Bank)
  1 June 2004 12 August 2003 tick.png 
Suncorp Metway Limited 1 December 2013 30 June 2004   tick.png 
Westpac Banking Corporation  1 February 2014 1 June 2004   tick.png 


¹Section 912D of the Corporations Act 2001 is an important self reporting obligation that is imposed on all entities that hold an Australian Financial Services Licence (AFSL). ASIC has recently issued a document entitled 'Breach reporting by AFS licensees - An ASIC guide' (Guide), that provides some guidance about how ASIC will administer section 912D and what ASIC expects licensees to do.


*for the purposes of s912D... ASIC will consider that a licensee [Your Bank] has become 'aware' of a [Code] breach (or a likely breach) 'when a person responsible for compliance becomes aware of the breach'.

²2011 FOS CIRCULAR - DISPUTE HANDLING      see-------[PDF]  ISSUE 7 - SPRING 2011 - Financial Ombudsman Service



*The CCMC is an independent compliance monitoring body established under clause 36 of the revised 2013 Code of Banking Practice (the 2013 Code). When endorsing the 2013 Code the subscribing banks agreed that Clause 36 would commence on 1 February 2013. At the same time, a new Mandate for the CCMC (the Mandate) which details its powers and functions became effective.


Guidance Note No. 1 - CCMC Compliance Monitoring


What is a Guidance Note? 


*The CCMC has developed a number of Guidance Notes to ensure stakeholders are aware of the processes and procedures of the CCMC and how they may be applied when monitoring compliance with the Code and investigating allegations of Code breaches.      The Guidance Notes have been published on the CCMC website following consultation with the Australian Bankers Association (the ABA) and Financial Ombudsman Service (FOS).


When will the CCMC investigate an allegation that a bank has breached the Code?

*Item 6, says---------In conducting the ACS program, the CCMC focuses on several aspects of Code compliance, including:

  1. how effectively banks are complying with their Code obligations; 
  2. the effectiveness and robustness of the Code compliance monitoring frameworks within the banks; 
  3. reviewing and assessing Code breach identification and breach management within the banks;
  4. identifying and reporting on significant breaches and systemic issues related to Code compliance, monitoring rectification activity and assessing industry impact;
  5. areas of emerging or significant risk in relation to banks’ compliance with their code obligations; and 
  6. identifying and reporting areas of good industry practice.



Summary of the FOS Approach to the Code of Banking Practice:  (the Code)  -   Download the approach document


We [FOS] consider the Code represents good industry practice and generally reflects the common law obligations of financial services providers (FSPs). The Code is published by the Australian Bankers Association.This document sets out the way we take the Code into account when we consider disputes.


The Code sets out standards of good banking practice, and FSPs [Your Bank] that adopt it promise to follow the Code when they deal with consumers who are, or may become, their individual or small business customers. 


Para 5, says; 'We consider that if an FSP adopts the Code but does not comply with it, then the FSP [Your Bank] has breached its contract with the consumer.'



Fordham Law Review Volume 75 | Issue 4Article 4 2007

see-----[PDF] Turning a Blind EyeWall Street Finance of Predatory Lending


Securitization turns a blind eye to the underwriting of subprime loans:


This paper properly predicted in 2007 the collapse of the capital markets in the event change was not implemented---- Although US in content, the circumstances, it's conclusion and proposed remedy is as relevant now as it was in 2007 [USA] ---since, in a monumental folly----the Aust. Govt. bought $15.5b of junk mortgages ("lemons") of which it still retains approx. $8b


see----AOFM steps up RMBS salesCAPITAL MARKETS: also---- AOFM profitably supports mortgage marketCAPITAL MARKETS

  1.  potential significant “put backs” [==$billions of dollars] pertaining to the bundle/s of it's residual $8 billion [of an initial/original $15.5b splurge] re AOFM RMBS Purchase Program 2008 - August, 2012 and other secondary market 'actors' also linked, dubiously induced into purchasing [in part] those same tainted Aust. Govt's AOFM mortgage pools spun-off by the Cabal 'actors'.



" In a 2004 report to Congress, GAO expressed optimism that market discipline by investors in subprime mortgage-backed securities would help drive out predatory lending. 30 3 That optimism was misplaced----------Predatory loans continue to be financed by the capital markets.


Furthermore, experience has shown that the private-label secondary market [actors] will generally only screen out abusive loans when required to do so by law.       The Department of Housing and Urban Development put it well when it said in the context of FHA-insured loans,

"Effective due diligence policies, uniformly applied by mortgagees prior to purchase, would cripple the ability of fraudulent lenders to pawn predatory loans off on others in the mortgage industry. If predatory loans cannot be sold, they are unlikely to be made and all borrowers ... will be protected." 304


For the reasons we have described, the time has come to adopt assignee ['final-purchaser'] liability on a nationwide basis for securitized home loans."




Numerous studies have discussed the negative externalities that securitization imposes on creditors.'   Scholars have paid scant attention, however, to harms caused by securitization to debtors whose loans are securitized.2     This issue has erupted in the subprime home mortgage market, where charges of predatory lending, many of which have been substantiated, are mounting.3


The vast majority of subprime loans are now securitized, leading to claims that securitization facilitates predatory lending and should actively police lenders. Nonetheless, the entities involved in securitization have resisted addressing such concerns and continue to serve as major conduits for predatory loans.4As this excerpt from one prospectus illustrates, securitization turns a blind eye to the underwriting of subprime loans


As this suggests, Wall Street firms securitize subprime home loans without determining if loan pools contain predatory loans. In the worst situations, secondary market actors have actively facilitated abusive lending. 6 


At first blush, securitization's lack of concern about subprime underwriting seems odd. After all, investors in mortgage-backed securities should be concerned about the heightened default risk of subprime loans and predatory loans in particular.7     Furthermore, they should be concerned that subprime lenders will try to pass off their worst loans through securitization-the "lemons" problem that George Akerlof described.8


Given investors' concerns, one might expect the capital markets to screen out the riskiest, predatory loans from securitized subprime loan pools. There is growing evidence, however, that securitizing entities perform inadequate screening. When meaningful screening does occur, it focuses on loans originated in states that impose liability on assignees of predatory loans. In states with weak anti-predatory lending laws, screening is minimal or nonexistent.


As we explain, securitization solves the lemons problem for investors without requiring the capital markets to screen out predatory loans from securitized offerings. Investment banks employ a variety of techniques, primarily structured finance and deal provisions, to shield investors from virtually all of the credit and litigation risk associated with predatory loans......


The protections that securitization provides investors do not safeguard borrowers. ....  The resulting cost to borrowers is substantial.


A. CreditRisk

B. PrepaymentRisk

  1. LitigationRisk



A.The Protections Provided by Sequential Tranches

B. Investors in Subprime Offerings Benefit from Conservative Risk Assessments by Rating Agencies

  1. Diversification
  2. Pricing
  1. DueDiligence
  1. DealProvisions
  1. Representations and Warranties
  2. Recourse and Collateral Substitution Clauses
  3. Requiring Lenders to Retain Servicing Rights
  1. Credit-Default Swaps                                                                                                                                                                                                                                         VI WHY PREDATORY LENDING PERSISTS DESPITE RISK MANAGEMENT          The Unholy Alliance of Marginal Lenders and Loan Aggregators
  1. Lenders Do Not Always Retain an Interest in the Subordinated Tranches
  1. Due DiligenceIs Often Cursory
  1. What Subprime Due Diligence Means Today
  2. Impediments to Meaningful Due Diligence by Investors
  1. Recourse ClausesAre Limited in Reach and Are Not Consistently Enforced
  1. RetainedServicingRightsAreNottheNorm
  1. Excess Demand for Subprime Securitizations
  1. Predatory Lending Harms Borrowers and Impose sExternal Costson Communities
  2. The Secondary Market CanMore Efficiently Bearthe Costs of Policing Predatory Lenders
  1. Securitization Impedes Borrowers'Ability to Obtain Relief from Predatory Loans
  2. Securitization Impedes Work-Outs with Injured Borrowers
  1. Securitization Causes Borrowers to Pay an Excess Risk Premium
  1. The Holder-In-Due-CourseRule Creates Inequities
  1. Subprime Borrowers Lack Effective Bargaining Power


  1. Considerations When Designing a Due Diligence Standard for Securitizing Residential Mortgage Loans
  1. Cost-Effective Screening of Individual Loans

2. Meaningful Screening Requires Adoption of Strict National Anti-predatory Lending Standards

  1. Screening and Its Limitations
  2. Tailoring Screening to the TBA and 144A Markets

B.A Proposaflor Assignee Liability in ResidentialMortgage Securitizations

  1. Due Diligence
  2. Assignee Liability
  1. Which Claims Would Be Subject to Assignee Liability?
  1. Remedies Available Against Assignees
  1. Comparison to ExistingAssignee LiabilityProvisions

A. Our Due Diligence Proposal Does Not Espouse Radical Changes to the Secondary Market

  1. Our ProposalWill Not Drive Out Legitimate Credit
  1. Rating Agencies Do Rate Loans Subject to Damages Caps for Assignee Liability
  2. Our Proposal Will Not Make Legitimate Loans Unaffordable
  1. Our Proposal Could Help Solve Adverse Selection Problems that Harm Securitizers, Lenders, and Borrowers
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  • doyla66
    doyla66 Monday, 12 May 2014

    I've just read through Levitt's submission again - recommended reading as even with the "censorship" it's great reading and so relevant and timely.
    Re Banking Code, what about non-bank lenders - is there a similar adoption date list for them? (Both ADI and non-ADI).
    Who represents non-bank lenders e.g. Firstmac? Who regulates them now? ASIC?
    If the non-bank lenders didn't subscribe to the Banking Code what Law or Code regulated their lending conduct prior to the UCCC?

  • doyla66
    doyla66 Wednesday, 14 May 2014

    Interesting how those Insolvency practioners all come out defending their industry as well as taking a swipe at Levitt.
    I can say from first hand experience, even if an individual or firm is a member of the IPA, they can and still do act as a law unto themselves! Trying to get anybody to follow up on practices outside of their "code" or even outside of Corporate Law is simply a joke. There is one rule for them, another for the lawyers, another for the bankers and there is yet another for us plebs!
    The insolvency practioner is appointed by the bank, sells our business for about a quarter of the value, lies in the reports to the bank, fails to verify their facts, employs the wife of the business broker tasked with selling our business as the manager to run the business down prior to sale and who the heck will do a bloody thing about it? Absolutely nobody - - - because they are all feeding off the same banker-led gravy train.
    And the judiciary has the gall to label us going through these processes as being "disenfranchised"!! Yep, we are! And we are angry with it - - - for darn good reason. If you got out from breathing your rarified air in Canberra, you may just discover some real truths to this financial, banker-led mess the rest of Australia copes with . . .

  • doyla66
    doyla66 Monday, 12 May 2014

    I'd like to know as well transformation,
    Given that the non-bank lenders source some of their funds from the wholesale lending programs,through the major banks,would the Code of Banking apply to those loans?
    My understanding of non bank lenders is that they are more like managers of the mortgage,correct me if that is wrong.They also don't hold a Financial Service Licence,unless that has changed,the Code probably doesn't apply to them.,in that case.
    Are the Trustees i.e Permanent and Perpetual as the lenders bound by the COBP ?

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