ASIC commences civil penalty proceedings against major bank

by AB01 Mar 2017
ASIC has today commenced civil penalty proceedings in the Federal Court against Westpac Banking Corporation (Westpac) for a number of contraventions of the responsible lending provisions of National Consumer Credit Protection Act 2009 (Cth) (the National Credit Act).

ASIC alleges that in the period between December 2011 and March 2015 Westpac failed to properly assess whether borrowers could meet their repayment obligations before entering into home loan contracts.

Specifically, ASIC alleges that Westpac:
  • used a benchmark instead of the actual expenses declared by borrowers in assessing their ability to repay the loan
  • approved loans where a proper assessment of a borrower's ability to repay the loan would have shown a monthly deficit for home loans with an interest-only period, Westpac failed to have regard to the higher repayments at the end of the interest-only period when assessing the borrowers' ability to repay.

The National Credit Act provides consumer protections to ensure that credit providers make reasonable inquiries about a borrower's financial situation and assess whether a loan contract will be unsuitable for the borrowers.

The first hearing for the proceedings will be on 21 March 2017 at 9.30am in the Federal Court in Sydney.
 

COMMENTS

  • by Dave Robinson 1/03/2017 4:29:58 PM

    Brilliant, I have personal knowledge of where they were giving out loans to people who couldn't afford it. When brought to their attention they said that it didn't matter....well guess what it did and it does. Will be watching this very closely and of course the repercussions that will flow through. If you are a broker that only used Lender Calc's for servicing then you could be in for a rough ride if ASIC starts looking at brokers as well as lenders.

  • by Bye Bye HPI 1/03/2017 4:59:27 PM

    About time!! .... The Banks (and other non-banks / trustees) have been misusing the using Henderson Poverty Index for years. Reasonable Inquiries are defined in ASIC v Cash Store [FCA] as being references to both income and expenditure. The reasonable inquiry provisions have been in the Consumer Credit Laws since 1996 (UCCC - S.72 (2) (l) now S.76 (2) (l) of the NCC) In 2008 the HPI 'cost of living' was around $900.00 per month wherein most single people's expenses exceeded that, sometimes by double.

    I know borrowers are disappointed if they are not approved for a loan - but saying no in the beginning rather than placing borrowers into debt obligations they can not afford is more responsible to both investors (banks / securitisers) and to the borrowers.


  • by Frustrated! 1/03/2017 5:22:58 PM

    Good to see that ASIC are now going to focus their attention to banks as well. I just hope that the investigation extends beyond the bank itself and ASIC start taking legal action against those who are writing the loan as well. yes Westpac need to pick up their game when it comes to monitoring its employees; however the individual that wrote the loan should also shoulder the majority of the blame as they are fully aware of what they are doing when they submit the application for assessment.

    I hear a lot of stories from clients/ prospective clients about their experiences when dealing with lenders direct. A hell of a lot of these loans should not have been approved in the first place. I have lost count of the amount of Interest only owner occupied loans that I have had to try and untangle where the sole reason why the bank offered the client interest only was to make the loan affordable?!