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A party who agrees to be responsible for the payment of another party's debts should the original party fail to pay or perform according to a contract.
Westpac Shutters RAMS: Streamlining for the Future
Westpac Shutters RAMS: Streamlining for the Future
Westpac confirmed in an Australian Securities Exchange statement that it would cease new home loan applications through RAMS, effective immediately. The decision follows a comprehensive “strategic review” aimed at simplifying Westpac's overall business model.
"We have accomplished significant portfolio simplification over recent years. After a thorough evaluation, it became clear that continuing to offer home loans through RAMS franchisees does not align with Westpac's future direction," stated Damien MacRae, Westpac's managing director for mortgages.
The bank has assured customers that current RAMS home loan holders will not see their services interrupted. Existing loans remain intact, and customers can still access support via the RAMS app, website, and call centers. Westpac also indicated proactive communication with these customers regarding any mortgage applications already in progress.
To mitigate the effects on franchisees and employees, MacRae mentioned, "We are offering mutually agreed support for franchisees and ensuring there are ongoing opportunities within Westpac for RAMS employees."
Westpac has decided to retain RAMS' existing loan portfolio, which is valued at approximately $31.8 billion, implying a significant ongoing commitment to the legacy customers of the subsidiary.
In response to similar moves by prominent banks, such as ANZ facing a significant $14bn bond scandal earlier this year, Westpac’s decision comes at a time of heightened scrutiny and industry-wide changes. As financial institutions refine their operational models, the second-order effects on employees and smaller franchisees become tangible.
Founded in 1991, RAMS had grown into one of Australia’s leading non-bank home loan providers before its acquisition by Westpac in 2008 for $140 million. This year, an attempt to sell RAMS was aborted due to unsatisfactory bids, illustrating the complex challenges in divesting a business line during turbulent economic times.
Additionally, RAMS franchisees have initiated a class-action lawsuit via Morris Mennilli Lawyers, due to the termination of franchise agreements. While Westpac remains poised to defend this lawsuit, the full scale and implications of this legal battle remain to be seen.
The Australian Securities and Investments Commission (ASIC) along with the Australian Prudential Regulation Authority (APRA) are reportedly investigating RAMS' practices, further complicating the landscape for all parties involved.
For more insights on the evolving narrative surrounding this subject, you can refer to the original article published by Duncan Evans for NewsWire. Keep tabs on the latest developments in the banking sector by subscribing to our updates.
Published:Thursday, 8th Aug 2024
Source: Paige Estritori
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