Following its Tuesday victory against ASIC, with the court dismissing the regulator’s allegations of irresponsible lending, Westpac has announced a spectrum of changes to its home lending policies.
The updated guidelines are set to go into effect on 20 August, at not only the major, but its associated brands: St. George, Bank of Melbourne, and Bank SA.
Perhaps most notably, Westpac is to update and add new expense categories to its household expenditure measure “to reflect industry guidelines on the HEM values we use as our customer expense benchmarks” – bringing the total number of categories from 13 to 18.
Further, the bank will apply income-based HEM bands based on total gross unshaded income, including gross rental income.
Particularly relevant in light of the recently dismissed court case, in instances when total laibility is seven times or more higher than total gross income, the loan applications will be reviewed by a credit assessment officer rather than run through the automated system.
ASIC’s case against the bank had hinged on the allegation Westpac breached the National Consumer Credit Protection Act 2009 through assessing loans via its automated system which solely considers the benchmark HEM rather than customers' declared living expenses.
Westpac additionally addressed the changes being made to tax debt through changing its approach to margin loans. They will now be assessed on the higher of 1% of the balance or the customer’s monthly declared commitment.
Further, Westpac will require a more comprehensive understanding of payment plans businesses have made with the ATO and decline to lend to customers with an overdue amount payable to the ATO for the previous year’s tax without a formal payment plan in place.
The policy changes will impact all new and re-submitted applications made from Tuesday, requiring brokers to utilise the expanded 18 categories for expenses, as well as heed the new seven times debt-to-income ratio.
Westpac also announced that changes to the commercial, SME and private wealth broking channels will be made later this year.