ASIC has revealed its responsible lending case against Westpac cost taxpayers millions.
The case centred on Westpac’s use of an automatic process to approve hundreds of thousands of home loans, substituting would-be borrowers’ actual living expenditures for a relatively low benchmark, the Household Expenditure Measure.
In his judgement last year, Justice Perram found that a customer’s current living expenses weren’t an important indicator of whether they could afford the loan, contending expenses could be cut if necessary.
The Australian Securities and Investments Commission (ASIC) has revealed that its proceedings against Westpac Group for alleged breaches of responsible lending have cost taxpayers at least $1.83 million.
The costs include expenses from a pre-litigation investigation of Westpac’s conduct, as well as charges associated with proceedings in the Federal Court and the regulator’s appeal to the Full Federal Court.
However, the costs exclude Westpac’s litigation expenses, which the court ordered ASIC to pay after its appeal was dismissed.
ASIC stated that Westpac is yet to disclose its expenses to the corporate regulator.
The litigation costs were revealed in a response to a question on notice from Liberal senator and chair of the parliamentary joint committee on corporations and financial services, James Paterson, from a public hearing held last month.
The public hearing was held prior to ASIC’s decision to accept the Full Federal Court’s judgement, which the regulator had considered appealing to the High Court.
Senator Paterson had questioned whether a move to take the matter to the High Court would be counterintuitive.
“As we’ve discussed in this case previously, it’s ASIC’s aspiration to have clarity in the law and that’s what you said the appeal could provide,” he said.
“Obviously, that clarity could also be provided by ASIC accepting the court’s ruling of what the law is.
“Now that you’ve appealed once and been unsuccessful, is it really wise for ASIC to create further uncertainty with another appeal?”
The regulator has since announced that in light of the Full Federal Court’s decision, it would review its updated regulatory guidance and consider the implications of the Federal Court’s decision on compliance practices.
ASIC issued its new guidance in December 2019, after holding two rounds of public consultation with industry stakeholders.
The principles-based guidance was designed to provide lenders with greater clarity and flexibility amid uncertainty off the back of scrutiny from the banking royal commission.
However, ASIC has stressed that prospective reforms of the National Consumer Credit Protection Act to further clarify the enforcement of responsible lending obligations is “ultimately a matter for the federal government and Parliament”.