The Australian Securities & Investments Commission (ASIC) launched proceedings against Westpac Banking Corp on Wednesday for alleged breaches of responsible lending laws on home loans.
The federal agency is seeking civil penalties for contravening the responsible lending provisions of the National Consumer Credit Protection Act between December 2011-March 2015.
ASIC alleges the bank failed during that period to properly assess whether borrowers could meet their repayment obligations before entering into home loan contracts.
The agency alleged Westpac:
- used a benchmark instead of the actual expenses borrowers declared in assessing their ability to repay the loan
- approved loans where a proper assessment of a borrower’s ability to repay the loan would have shown a monthly deficit, and
- for home loans with an interest-only period, failed to have regard to the higher repayments at the end of the interest-only period when assessing the borrowers’ ability to repay.
The National Consumer Credit Protection Act has provisions to ensure that credit providers make reasonable inquiries about a borrower’s financial situation and assess whether a loan contract will be unsuitable for the borrowers.
The first hearing for the proceedings will be on 21 March in the Federal Court in Sydney.
ASIC said the action against Westpac followed its review of interest-only home loans, in which it reviewed the responsible lending practices of 11 lenders.
Concise statement – ASIC vs Westpac
20 August 2015: Home loans review
ASIC release, 20 August 2015: Lenders to improve standards following interest-only loan review
Attribution: ASIC release.