A total of 13,000 Westpac owner-occupier customers are receiving a refund from the bank after a system error which saw interest-only home loans fail to automatically switch to principal and interest repayments at the end of the interest-only period.
The Australian Securities and Investments Commission (ASIC) said the effect of the error meant customers had not started paying principal on loans at the initial time agreed with the bank, which meant they now had a smaller period in which to repay the loan.
Remediation for the error on behalf of Westpac would include a refund of the additional interest paid, and a discount for the time remainder of the loan.
In response to the claims, ASIC acting chair, Peter Kell said banks had to ensure oversights did not affect customers.
“All banks should be reviewing their systems to ensure that they minimise the chance of any such errors occurring, and that any risks to customers are identified early,” he said.
“Greater regulatory scrutiny of interest-only loans has led to improvements in how lenders are providing these loans, including in lenders identifying system errors.”
“If past errors are identified, remediation needs to be timely, transparent and effective.”