ASIC commences civil penalty proceedings against Westpac

ASIC has commenced civil penalty proceedings in the Federal Court against Westpac for failing to respond to customer hardship notices within the required time limit.

Between 2015 and 2022, ASIC alleges a deficiency with Westpac’s online hardship notice process resulted in 229 Westpac customers not receiving a response to their hardship notice within the required timeframe of 21 days.

All affected customers had told the bank they were experiencing financial difficulty and hardship and some endured debt collection activity while waiting for Westpac’s response. 

ASIC deputy chair, Sarah Court, said: “Submitting a hardship notice, which results in a change to the credit contract, can be a lifeline for people experiencing challenging financial circumstances.

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“ASIC has taken this action to highlight the importance of lenders responding to hardship notices within the required timeframe to reduce harm to their customers. Westpac’s failures to respond to these notices compounded their customers’ difficult financial circumstances.”

ASIC also alleges Westpac breached the National Credit Code between 4 September 2017 and 20 March 2022.

Under the Code, a lender has 21 days to notify the customer if it does not agree to change the contract or if it requires further information to make its decision.

ASIC also alleges that Westpac breached the National Credit Act by failing to act efficiently, honestly and fairly when it came to responding to its customers’ hardship notices.

ASIC claims Westpac failed to do enough to investigate and rectify the systems issues plaguing its online hardship notification process.

ASIC is seeking declarations, pecuniary penalties and adverse publicity orders against Westpac from the Court.

This is ASIC’s second action against a credit provider for failure to comply with s72(4) of the National Credit Code. Action taken against ClearLoans in February 2023 resulted in a $6 million penalty for financial hardship misconduct.

In a statement to the ASX, Westpac responded that the problems related to a technology failure incurred by the bank and said, during the period, some 630,000 applications had been received. 

"This error meant we didn't provide some of our customers with the help they needed. For this, we are deeply sorry," said Westpac group chief information officer Scott Collary.

"While we have assisted some of these customers in subsequent contact, it is not good enough that we missed their initial attempt to get in touch.

"Since we uncovered this issue, we have contacted these customers and completed a remediation program including refunds of fees and interest, debt waivers and payments for non-financial loss, totalling approximately $900,000." 

In April 2022, Westpac was ordered by the Federal Court to pay penalties of $113 million for widespread compliance failures across multiple businesses, including Westpac’s banking, superannuation, wealth management and insurance brands.

That was the last of six separate civil penalty proceedings filed by ASIC against Westpac in November 2021, penalising Westpac $40 million for charging advice fees to over 11,800 deceased customers.