On Tuesday, the Australian Securities and Investments Commission (ASIC) announced it has commenced civil penalty proceedings in the Federal Court against Westpac over alleged breaches of the National Credit Code and the National Credit Act.
The regulator alleges that, between 2015 and 2022, a deficiency with Westpac’s online hardship notice process resulted in 229 of the bank’s customers not receiving a response to their applications for hardship assistance within the required 21-day timeframe.
ASIC noted that all of these customers told Westpac they were experiencing financial hardship and many told the bank about difficult circumstances and vulnerabilities, including an inability to work, impacts of serious medical conditions or carer responsibilities.
Furthermore, in some cases, ASIC said that customers endured debt collection activities by Westpac while waiting for the bank to respond to their hardship notices.
“Submitting a hardship notice, which results in a change to the credit contract, can be a lifeline for people experiencing challenging financial circumstances,” commented ASIC deputy chair Sarah Court.
“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.”
Specifically, ASIC claims that, between 4 September 2017 and 20 March 2022, Westpac breached the National Credit Code, under which a lender has 21 days to notify a customer if it does not agree to change the contract or if it requires further information to make its decision.
Additionally, the regulator alleges that Westpac breached the National Credit Act by “failing to act efficiently, honestly and fairly” when it came to responding to hardship notices.
ASIC claims that Westpac “did not do enough to investigate and rectify the systems issues plaguing its online hardship notification process”.
It is seeking declarations, pecuniary penalties, and adverse publicity orders against the bank from the court. The date for the first case management hearing is yet to be scheduled.
Westpac acknowledged the proceedings in a statement to the ASX on Tuesday.
“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.”
Mr Collary said the bank had contacted the customers and completed a remediation program including refunds of fees and interest, debt waivers and payments for non-financial loss totalling approximately $900,000.
“We have strengthened our processes and are upgrading our online hardship applications,” he added.
Westpac noted that it had self-reported the incident to ASIC. The bank said that it was considering the matters raised by the regulator and had cooperated with its investigation.
