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

06 Septembre, 2018, 13:57 | Auteur: Auguste Feret

A major lender has admitted to breaching responsible lending obligations when providing home loans and agreed to submit to a $35 million civil penalty to resolve Federal Court proceedings.

If approved by the court, this will be the largest ever civil penalty under the National Consumer Credit Protection Act 2009 (National Credit Act) and almost double the previous record penalty for a National Credit Act breach.

The action related to Westpac's home loan assessment process between December 2011 and March 2015 with the bank using incorrect information about customers' expenses when deciding on whether loans should be approved.

ASIC Chair James Shipton said, "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".

This meant thousands of Westpac customers were approved for home loans whose repayment terms were beyond their capacity to pay, and stood to have suffered financial hardship.

Last month, the chairman of the country's sovereign wealth fund accused it of being "not awake at the wheel".

Of these approximately 100,000 loans, Westpac should not have automatically approved approximately 10,500 loans.

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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.

ASIC announced the outcome today, with Westpac admitting breaching the National Credit Act.

"Westpac takes its responsible lending obligations very seriously and this action does not relate to our current lending practices", Westpac's consumer bank CEO George Frazis said in the statement.

He said the relevant loans had continued to perform similar to, or better than, the rest of the group's home loan portfolio.

Earlier this year, Westpac was found to have the riskiest mortgage-book of the four banks dominating about 80 percent of the Australian market, according to analysts. Lenders must then verify the information to ensure that it is true, and then assess whether the loan is unsuitable for the borrower.

Shares of the lender slipped 0.8 percent on Tuesday, in line slight losses in the broader market.

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