ASIC Sues Westpac for Financial Hardship Misconduct

ASIC said Westpac’s deficient process resulted in 229 customers not receiving a response to their hardship notice within the required 21 days.

ASIC (Australian Securities & Investments Commission) has commenced Federal Court proceedings against Westpac, alleging that the bank failed to respond to customers’ hardship notices within the time required by law.

Under the National Credit Code, an individual with overdue payments can request a change to the terms of their credit contract on the grounds of financial hardship, and creditors are required to provide a response in writing within 21 days of being informed.

ASIC said Westpac had a deficiency in its online hardship notice process between 2015 and 2022 that resulted in 229 customers not receiving a response to their hardship notice within the required 21 days.

ASIC said all of these customers told Westpac they were experiencing financial hardship, and many told it about their difficult circumstances and vulnerabilities, including their inability to work, the impacts of serious medical conditions, or their carer responsibilities. “In some cases, customers endured debt collection activities by Westpac while waiting for the bank to respond to their hardship notices.”

Deputy chair Sarah Court said ASIC has taken action against Westpac to highlight the importance of responding to hardship notices within the required timeframe to reduce customer harm. “Westpac’s failures to respond to these notices compounded their customers’ difficult financial circumstances,” she added.

ASIC 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, and that the bank did not do enough to investigate and rectify systems issues in its online hardship notification process.

In a statement, Westpac group chief information officer Scott Collary said a technology failure resulted in the bank’s failure to provide some customers with the help they needed. “For this, we are deeply sorry. 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,” he said.

Collary added that Westpac has since contacted the affected customers and completed a remediation programme including refunds of fees and interest, debt waivers and payments for non-financial loss of about AUD 900,000 (USD 580,000). “We have strengthened our processes and are upgrading our online hardship applications,” he said.

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

ASIC previously took action against Membo Finance and its sole credit representative, Richmond Group Financial Services, trading as ClearLoans, for financial hardship misconduct. The Federal Court ordered a AUD 6 million penalty.

Financial hardship will be an area of increased focus for ASIC over the next 12 months. The regulator recently said it plans conduct a review of ten large home lenders to understand their approaches in this area and come up with industry guidance on better practices.

ASIC said lenders should ensure they have appropriate arrangements in place to respond to and support consumers experiencing financial hardship, and to ensure they engage in credit activities efficiently, honestly and fairly.