ASIC commences civil penalty proceedings against Westpac for breaching home-loan responsible lending laws

This is a big deal. Westpac is the largest investment mortgage lender, and it  highlights the need for “microprudential” analysis of loans. But in 2011 other lenders were doing the same. The question of interest only repayments is certainly a live issue.

ASIC says it has today commenced civil penalty proceedings in the Federal Court against Westpac Banking Corporation (Westpac) for a number of contraventions of the responsible lending provisions of National Consumer Credit Protection Act 2009 (Cth) (the National Credit Act).

ASIC alleges that in the period between December 2011 and March 2015 Westpac failed to properly assess whether borrowers could meet their repayment obligations before entering into home loan contracts.

Specifically, ASIC alleges that Westpac:

  • used a benchmark instead of the actual expenses declared by borrowers 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
  • for home loans with an interest-only period, Westpac 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 Credit Act provides consumer protections 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 2017 at 9.30am in the Federal Court in Sydney.

ASIC will be making no further comment at this time.



The proceedings follow ASIC’s review of interest-only home loans (REP 445) in which ASIC reviewed the responsible lending practices of 11 lenders (refer: 15-220MR).

Author: Martin North

Martin North is the Principal of Digital Finance Analytics

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