Westpac Admits Lending Breaches, Settles for $25 Million Penalty
Westpac Admits Lending Breaches, Settles for $25 Million Penalty
(Bloomberg) -- Westpac Banking Corp. agreed to pay a A$35 million ($25 million) civil penalty after admitting it breached responsible-lending laws by failing to properly assess whether some customers could afford to repay their mortgages.
In a settlement ahead of court, the regulator said in a statement that Westpac’s automated loan approval system had failed to use customers’ actual living expenses when assessing affordability and instead relied on a lower benchmark. The system also failed to take into account how an interest-only period would affect repayments for the life of the loan.
“This outcome is a warning to all lenders that they must comply with the responsible lending obligations,” Australian Securities & Investments Commission Chairman James Shipton said. “If they do not, ASIC will take action to enforce the law.”
The case related to 100,000 loans made between December 2011 and March 2015. Of these, approximately 10,500 should not have been automatically approved, ASIC said. The A$35 million civil penalty, if approved by the court, will be the largest for a consumer-credit breach, the regulator said.
“Westpac takes its responsible lending obligations very seriously and this action does not relate to our current lending practices,” George Frazis, who heads Westpac’s consumer bank, said in a separate statement. “We upgraded our credit assessment in 2015 and continue to thoroughly assess home loan applications.”
The bank said it hasn’t made any admissions that any of its loans were unsuitable for customers at the time of origination.
To contact the reporter on this story: Emily Cadman in Sydney at ecadman2@bloomberg.net
To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Russell Ward, Katrina Nicholas
©2018 Bloomberg L.P.