Borrow
Big four bank fails responsible lending obligations
A major lender has reached a $35 million settlement with the corporate regulator after it was found to have granted 100,000 loans without sufficiently assessing their suitability.
Big four bank fails responsible lending obligations
A major lender has reached a $35 million settlement with the corporate regulator after it was found to have granted 100,000 loans without sufficiently assessing their suitability.
Responsible lending obligations form a “cornerstone protection” for lenders and borrowers, but it was a protection that went unobserved for around 100,000 Westpac borrowers between December 2011 and March 2015, the Australian Securities and Investments Commission (ASIC) said on Tuesday.
According to an ASIC release, Westpac has admitted to breaching its responsible lending obligations when providing home loans and will pay a $35 million civil penalty.
The announcement pre-empts a three-week trial due to begin on Monday.
However, both ASIC and Westpac told the Federal Court that the bank had failed to satisfy its responsible lending provisions as its automated decision system failed to account for consumers’ declared living expenses when measuring their ability to meet repayments, instead relying on the household expenditure measure benchmark.
Additionally, Westpac admitted its system failed to account for the higher repayments demanded at the end of an interest-only period when assessing customers’ ability to pay their mortgages.
These breaches meant about 100,000 loans were granted using expense information that was lower than consumers’ actual expenses, with ASIC finding that of these, 10,500 loans should not have been automatically approved.
The watchdog noted that if approved by the Federal Court, this action will be the largest civil penalty awarded under the National Credit Act.
“This is a very positive outcome and sends a strong regulatory message to industry that non-compliance with the responsible lending obligations will not be tolerated. Responsible lending in the home lending market is absolutely vital to consumers, banks and our economy,” ASIC chair James Shipton said.
“This outcome, and ASIC’s actions in relation to responsible lending, reinforce that all lenders must obtain information from individual borrowers about their financial situation to ensure that they can properly assess the ability of the customer to repay the loan.
“Lenders must then verify the information to ensure that it is true, and then assess whether the loan is unsuitable for the borrower. Taken together, these responsible lending obligations are a cornerstone protection for both borrowers and lenders.”
No one was hurt: Westpac
Responding to the settlement, Westpac added that ASIC has not alleged that customers suffered any specific loss or damage.
"From a credit quality perspective, loans approved under these circumstances have continued to perform similar to, or better than, the rest of the group’s home loan portfolio. Nevertheless, Westpac has committed to proactively monitor the active loans and to provide tailored hardship assistance if necessary," Westpac consumer bank chief executive George Frazis said.
Banking
Banks report $14.4bn profit amid pressure on net interest margins
Australia’s major banks have reported a significant boost to their bottom lines and returns in the first half of the 2022 financial year, signaling sector-wide resilience despite persistent pressure...Read more
Banking
Major banks report rising profits
NAB and ANZ announced their half-year results this week. ...Read more
Banking
Modernisation of direct debit system suffers setback
According to the Reserve Bank (RBA), several major banks will not be able to meet the current timeline for the launch of the PayTo service. ...Read more
Banking
Australians' trust in digital providers has decreased in last five years
Australians have little trust in organisations keeping their information secure, but the financial services industry still sits atop the list. ...Read more
Banking
Commonwealth Bank chairman to retire in August
The Commonwealth Bank (CBA) board has announced a successor. ...Read more
Banking
Westpac responds to $113m penalty
The big four bank has responded to the penalty handed down last week. ...Read more
Banking
Westpac ordered to pay $113m for ‘widespread compliance failures’
Westpac has been ordered to pay penalties in the amount of $113 million for widespread compliance failures across multiple businesses, including Westpac’s banking, superannuation, wealth management ...Read more
Banking
Big bank-backed start-up raises $12.75m
A landmark fundraise by Australia’s biggest banks has secured a war chest of $12.75 million to the sector’s blockchain consortium, Lygon, to bolster its research and development into helping banks...Read more
Wrapping up an eventful 2021
Listen now
What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now
Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now
Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now
Banking
Banks report $14.4bn profit amid pressure on net interest margins
Australia’s major banks have reported a significant boost to their bottom lines and returns in the first half of the 2022 financial year, signaling sector-wide resilience despite persistent pressure...Read more
Banking
Major banks report rising profits
NAB and ANZ announced their half-year results this week. ...Read more
Banking
Modernisation of direct debit system suffers setback
According to the Reserve Bank (RBA), several major banks will not be able to meet the current timeline for the launch of the PayTo service. ...Read more
Banking
Australians' trust in digital providers has decreased in last five years
Australians have little trust in organisations keeping their information secure, but the financial services industry still sits atop the list. ...Read more
Banking
Commonwealth Bank chairman to retire in August
The Commonwealth Bank (CBA) board has announced a successor. ...Read more
Banking
Westpac responds to $113m penalty
The big four bank has responded to the penalty handed down last week. ...Read more
Banking
Westpac ordered to pay $113m for ‘widespread compliance failures’
Westpac has been ordered to pay penalties in the amount of $113 million for widespread compliance failures across multiple businesses, including Westpac’s banking, superannuation, wealth management ...Read more
Banking
Big bank-backed start-up raises $12.75m
A landmark fundraise by Australia’s biggest banks has secured a war chest of $12.75 million to the sector’s blockchain consortium, Lygon, to bolster its research and development into helping banks...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
