Westpac fined for bad mortgage system amid bank inquiryStaff Writer |
Australia The proceedings relate to certain home loans
Westpac announced it has entered into an agreement with the Australian Securities and Investments Commission (ASIC) to settle the legal proceedings alleging breaches of certain responsible lending obligations under the National Consumer Credit Protection Act 2009 (Cth) (the NCCP Act). This settlement is subject to Court approval.
The proceedings were initiated by ASIC in March 2017. ASIC has not alleged that any customers suffered specific loss or damage as a result of these admissions, and there are no admissions that any loans were unsuitable for customers.
As part of the settlement, Westpac will acknowledge that its automated serviceability assessment did not meet the requirements of the NCCP Act in two ways and that it should have:
- used customers’ declared living expenses in a number of instances instead of the applicable Household Expenditure Measure (HEM) benchmark in the serviceability assessment; and
- calculated loan repayments for interest only, owner-occupied lending based on estimated repayments that would apply after the interest only period had finished.
During this period, Westpac’s automated decisioning process approved over 250,000 home loans. Of these, Westpac acknowledges that approximately 10,500 loans should have been referred to a credit officer for a manual assessment prior to any approval. Approximately 5,400 of these loans are still active and represent 0.4% of the mortgage portfolio.
As part of the agreement, Westpac has agreed to pay a $35 million penalty and ASIC’s legal costs. The impact of this settlement will be provided in Westpac’s 2018 Full Year results. Westpac and ASIC will make an application to the Federal Court for approval of this settlement. ■
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