ASIC has announced it will not pursue further action regarding the decision handed down in the Westpac responsible lending case, following the full Federal Court’s 2-1 decision to reject its earlier appeal.
ASIC filed that initial appeal against the decision of the Honourable Justice Perram in Westpac's favour on 10 September 2019. The matter was heard in February 2020, before the Full Federal Court handed down its majority decision dismissing ASIC’s application.
At that juncture, the regulator could have sought special leave to appeal to the High Court to obtain a ruling on the construction of the statute and again seek to change the outcome of the case; however, ASIC attributed its decision not to do so to understanding “the impact of the additional time required to resolve this matter in the current challenging economic circumstances”.
As such, ASIC instead plans to review its updated regulatory guide for responsible lending (RG 209) and consider what implications the Federal Court decision has for the document.
It was on 1 March 2017 when ASIC commenced Federal Court proceedings against Westpac, alleging that from December 2011 to March 2015, the bank failed to properly assess whether borrowers could meet their repayment obligations before entering into home loan contracts.
ASIC attributed its decision to take action to the great importance for judicial clarification to be provided around the “cornerstone legal obligation on lenders”, as the Credit Act requires them to not only make reasonable inquiries about a borrower’s financial circumstances and capacity to service a loan, but to verify the information obtained from borrowers and make an assessment of whether a loan is not unsuitable for the borrower.
On 13 August 2019, the Federal Court found Westpac had not breached the responsible lending provisions of the Credit Act, as Justice Perram decided a lender “may do what it wants in the assessment process”.