One of Australia's biggest banks, the ANZ, does not take steps to verify the expenses of people applying for home loans.
It checks their declared income but not expenses, which a royal commission heard possibly puts the bank in breach of Australia's responsible lending laws.
Senior counsel assisting the commission Rowena Orr QC said ANZ did nothing to verify the expenses recorded by a mortgage broker in a loan application.
ANZ's head of home loans William Ranken said the bank did not verify expenses beyond ensuring that the statement of living expenses has been signed by the customer.
Mr Ranken, who is responsible for ANZ's $265 billion home loan portfolio, said the bank indirectly verified customers' expenses through reference to a benchmark household expenditure measure.
If a customer's monthly expenses fell below that measure, the bank applied the higher benchmark.
Mr Ranken said it would be complex and costly to implement processes to check customers' expenses on every application.
Commissioner Kenneth Hayne QC said one view may be that there was a trade-off between administrative convenience and obeying the law.
"That's a very awkward trade-off if that's the way it's seen," he said on Monday.
Mr Ranken said ANZ took its legal and regulatory obligations seriously.
The inquiry heard the National Credit Act prohibits a bank from loaning someone money without making reasonable inquiries about, and taking reasonable steps to verify, the customer's financial situation.
The inquiry also heard ANZ stood by its decision to give a 30-year loan to a 71-year-old pensioner who fell victim to a scam and cannot afford the repayments.
"With the information that we had available at the time, and applying the policies and procedures that we apply for those types of loans at the time, it was in accordance with our policies and procedures," Mr Ranken said.
The inquiry heard Robert Regan took out the $50,000 loan thinking he was helping a British woman bring gold to Australia, but instead he ended up getting scammed and was left with loan repayments so big he's relying on food parcels to survive.
The now 72-year-old said the income and expenditure figures used by a mortgage broker to get the loan approved, using his home as security, were wrong.