The Australian multinational banking and financial services giant, Westpac, is currently embroiled in a legal battle with the Australian Securities and Investments Commission (ASIC) over allegations of mishandling customer hardship requests spanning seven years. In this blog, we’ll delve into the details of this legal action and its implications.
ASIC’s legal action revolves around the claim that Westpac failed to respond to hundreds of customers’ requests for financial relief, a lifeline for those facing challenging economic circumstances. Between 2015 and 2022, 229 customers informed Westpac about their financial hardships, citing reasons such as inability to work, medical conditions, or caregiver responsibilities. These customers sought assistance through Westpac’s online hardship notice process but were left without a response within the mandated 21-day timeframe.
According to ASIC, this failure to respond promptly constitutes a breach of the National Credit Code, which requires lenders to notify customers within three weeks if they do not agree to change the lending contract or need additional information. Additionally, ASIC contends that Westpac did not act “efficiently, honestly, and fairly” by not addressing legitimate requests from customers in need.
In response to the allegations, Westpac acknowledged the error and self-reported it to ASIC while cooperating with the investigation. Westpac’s Chief Information Officer, Scott Collary, issued an apology, stating, “This error meant we didn’t provide some of our customers with the help they needed. For this, we are deeply sorry.” The bank attributed the issue to a “technology failure” that prevented the hardship notices from reaching the bank’s customer support teams.
To rectify the situation, Westpac took several remedial actions. The bank refunded some fees and interest, waived debts, and made compensation payments for non-financial losses to affected customers, amounting to a total of $900,000. Despite these measures, ASIC’s case underscores how some customers endured debt collection activities while waiting for Westpac to respond to their hardship notices, exacerbating their financial difficulties.
Implications and Industry Focus
his legal dispute between ASIC and Westpac is not the first of its kind. Westpac has previously been targeted for alleged breaches of responsible lending laws, although a previous case was dismissed in 2019. This new legal action highlights the ongoing regulatory scrutiny of the financial sector and reinforces the need for banks to address customer hardship promptly and transparently.
ASIC’s move against Westpac comes at a time when increasing numbers of Australians are grappling with mortgage stress, driven by rising cost-of-living pressures. The regulator’s deputy chairman, Sarah Court, emphasized the importance of lenders responding to hardship notices within the required timeframe to minimize harm to their customers. ASIC’s increased focus on financial hardship aligns with a 28 percent increase in calls to the National Debt Hotline compared to the previous year, underscoring the urgency of addressing this issue.
Westpac’s acknowledgment of the technology failure and its efforts to remediate affected customers signal a step in the right direction. However, advocacy groups like the Consumer Action Law Centre stress that banks, as a sector, need to prioritize helping their customers, especially during times of economic hardship.
The legal action against Westpac by ASIC sheds light on the critical issue of responding to customer financial hardship promptly and fairly. It underscores the responsibility of financial institutions to adhere to regulatory codes and provide necessary assistance to those facing challenging economic circumstances. As this case unfolds in the Federal Court, it serves as a reminder of the ongoing efforts to ensure consumer protection and financial fairness in the banking sector.