A class action suit has been filed against the major bank over its mortgage business.
Law firm Maurice Blackburn Lawyers has filed a class action suit against Westpac in the Federal Court on Thursday (21 February) for alleged breaches of responsible lending obligations under the National Consumer Credit Protection Act 2009 (NCCP Act).
The class action, which is being funded by Harbour Fund IV, is being pursued on behalf of borrowers who were granted unsuitable loans by Westpac after 1 January 2011.
It is the first to be filed against one of the major banks since Commissioner Kenneth Hayne handed down his final recommendations after an 11-month inquiry into financial sector misconduct.
The lead plaintiffs in the case are Ian and Michelle Tate who claim to have experienced significant financial hardship as a result of Westpac’s lending practices.
The major bank reportedly lent the Tate family more than $1.8 million across five properties from 2008 to 2016, despite only one member having a regular income.
“Dealing with Westpac has devastated us,” Ms Tate, a mother of three, said.
“Everything we were trying to achieve is lost. Instead of striving for financial independence, we are back living pay cheque to pay cheque, tax return to tax return.
“We have gone backwards after years of hard work and struggle. It is worse than being back to square one.”
Maurice Blackburn is alleging that Westpac failed to verify information pertaining to the Tate family’s financial circumstances, particularly taking aim at the major bank’s use of the Household Expenditure Measure (HEM) to determine their ability to repay their debts, as opposed to assessing their actual expenses.
“This information was provided to Westpac by a broker. In total, Westpac lent the Tates – a family of five with one regular income – in excess of $1.8 million across five properties from 2008’2016,” the law firm’s announcement states.
It will also be argued that Westpac failed to assess whether customers would be able to cope with higher repayments after their interest-only loans expire and they’re switched to principal and interest contracts.
The law firm’s principal lawyer Ben Slade said the major bank has remained “unrepentant” despite the criticisms it received from the Australian Securities and Investments Commission (ASIC) and the Hayne royal commission.
“Westpac’s response to Commissioner Hayne’s findings in the financial services royal commission, and to the ongoing proceedings brought by ASIC in relation to Westpac’s responsible lending obligations does not reveal any acceptance by Westpac of its obligations to compensate those who have suffered, and are suffering, at the hands of the company,” Mr Slade said.
In a release to the ASX, the bank said: "Westpac takes its responsible lending obligations very seriously and will be defending the claims against it."
The major bank admitted last year to breaches of responsible lending obligations when issuing home loans to customers and agreed to pay a $35 million civil penalty to resolve Federal Court proceedings under the NCCP Act.
In a separate case against Westpac Group, the Federal Court ruled that Westpac Securities Administration Limited and BT Funds Management Limited had breached the best interests duty by conducting a telephone sales campaign recommending that customers roll out of their superannuation funds into their Westpac-related superannuation accounts without undertaking a proper comparison of the superannuation funds, as required by law.
The court, however, rejected ASIC’s allegation that these subsidiaries provided personal advice to the 15 customers in question, thereby breaching section 912A(1)(b) of the Corporations Act 2001.
The corporate regulator appealed the court’s decision, explaining that the appeal reflects its desire to “obtain further clarity and certainty” concerning the difference between general and personal advice for consumers and financial services providers.
Maurice Blackburn anticipates thousands of Westpac customers joining the newly filed class action suit.