Westpac to pay $35 million penalty in responsible lending settlement with ASIC

Westpac

Westpac will pay a $35 million civil penalty in a settlement with the corporate regulator, after ASIC took action against the bank in relation to alleged breaches of its responsible lending obligations.

The bank is alleged to have contravened consumer credit protection laws, relating to around 10,500 home loans it approved through an automated decision making process between December 2011 and March 2015.

The Australian Securities and Investments Commission (ASIC) alleged Westpac did not properly assess the capacity of individuals to repay home loans by using a benchmark metric, the Household Expenditure Measure, to assess living expenses.

The case, which was launched by ASIC last year, was due to go to trial in the Federal Court this week.

If the settlement is approved by the Federal Court it will be the largest civil penalty awarded under national credit protections that came into effect in 2009.

In a statement, ASIC chair James Shipton said the penalty would send a “strong regulatory message” to the banking industry, which has been the subject of a flurry of scandals recently amid a royal commission into misconduct in the banking sector.

“This is a very positive outcome and sends a strong regulatory message to industry that non-compliance with the responsible lending obligations will not be tolerated,” Shipton said.

“Responsible lending in the home lending market is absolutely vital to consumers, banks and our economy.”

In a response to the settlement lodged to the Australian Securities Exchange on Tuesday afternoon, Westpac chief executive of consumer banking George Frazis said that the bank upgraded its credit assessment in 2015.

“Westpac takes its responsible lending obligations very seriously and this action does not relate to our current lending practices,” he said in a statement.

Westpac also acknowledged its automated assessment did not calculate loan repayments for home loans to owner-occupiers based on estimated repayments applied after the interest only period had finished.

ASIC alleged this meant that Westpac did not properly assess the ability of borrowers to repay both the principal and interest portions of loans after the interest-only period ended.

Westpac said it approved over 250,00 home loans during the period subject to ASIC’s investigation, of which it acknowledged that around 10,500 should have been referred for manual assessment.

NOW READ: Small and mighty: Meet the challenger banks nipping at the heels of the big four

NOW READ: Fintech startup Tic:Toc raises $11.5 million to take the hassle out of home loan approvals

You can help us (and help yourself)

Small and medium businesses and startups have never needed credible, independent journalism and information more than now.

That’s our job at SmartCompany: to keep you informed with the news, interviews and analysis you need to manage your way through this unprecedented crisis.

Now, there’s a way you can help us keep doing this: by becoming a SmartCompany supporter.

Even a small contribution will help us to keep doing the journalism that keeps Australia’s entrepreneurs informed.

Trending

COMMENTS

Subscribe
Notify of
guest
3 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Free Advice
Free Advice
2 years ago

Oh, for heaven’s sake.
This $ 35 m. is just another sneaky tax by the government on Westpac’s customers, who will inevitably foot the bill.
Well done ASIC! Won’t change bank behaviour at all.
Where do you guys THINK the money comes from?

Concerned
Concerned
2 years ago

Given the Royal Banking Commission revelations, one has to ask why ASIC allowed Westpac to enter into an EU at the last minute when it was due to appear before the Federal Court. If found guilty, the FC would almost certainly have handed down a penalty well in excess of $35M. How many others has it done this with?
ASIC will not have impressed the FC either. It could be argued it’s been a process of blackmail – capitulate to the EU or else face a bigger fine by the FC – and a waste of the court’s valuable time.

Concerned
Concerned
2 years ago

Given the Royal Banking Commission revelations, one has to ask why ASIC allowed Westpac to enter into an EU at the last minute when it was due to appear before the Federal Court. If found guilty, the FC would almost certainly have handed down a penalty well in excess of $35M. How many others has it done this with?
ASIC will not have impressed the FC either. It could be argued it’s been a process of blackmail – capitulate to the EU or else face a bigger fine by the FC – and a waste of the court’s valuable time.