ASIC has taken Westpac to the Federal Court for failing to respond to customers’ hardship notices within the time required by law.
ASIC alleged that between 2015 and 2022, a deficiency with Westpac’s online hardship notice process resulted in 229 Westpac customers not receiving a response to their hardship notice within the required timeframe of 21 days as required by the National Credit Code.
All of these customers told Westpac they were experiencing financial hardship, according to ASIC.
Westpac acknowledged the proceedings and said that it received approximately 630,000 applications for financial hardship over the period.
“This error meant we didn’t provide some of our customers with the help they needed. For this, we are deeply sorry,” said Westpac group chief information officer Scott Collary.
“While we have assisted some of these customers in subsequent contact, it is not good enough that we missed their initial attempt to get in touch.”
The regulator said many of these customers also told Westpac about their difficult circumstances and vulnerabilities, including their inability to work, the impacts of serious medical conditions or their carer responsibilities.
In some cases, ASIC said customers endured debt collection activities by Westpac while waiting for the bank to respond to their hardship notices.
ASIC deputy chair Sarah Court (pictured above) said submitting a hardship notice, which results in a change to the credit contract, can be “a lifeline for people experiencing challenging financial circumstances”.
“ASIC has taken this action to highlight the importance of lenders responding to hardship notices within the required timeframe to reduce harm to their customers. Westpac’s failures to respond to these notices compounded their customers’ difficult financial circumstances,” Court said.
Collary said once Westpac identified the incident it self-reported it to ASIC and had cooperated with their investigation.
“Since we uncovered this issue, we’ve contacted these customers and completed a remediation program including refunds of fees and interest, debt waivers and payments for non-financial loss, totalling approximately $900,000,” Collary said.
“We have strengthened our processes and are upgrading our online hardship applications.”
ASIC alleged that between September 4, 2017 and March 20, 2022, Westpac breached the National Credit Code (Code). Under the Code, a lender has 21 days to notify the customer if it does not agree to change the contract or if it requires further information to make its decision.
ASIC also alleged that Westpac breached the National Credit Act by failing to act efficiently, honestly and fairly when it came to responding to its customers’ hardship notices.
ASIC claimed “Westpac did not do enough” to investigate and rectify the systems issues plaguing its online hardship notification process and that it is seeking declarations, pecuniary penalties, and adverse publicity orders against Westpac from the Court.
The date for the first case management hearing is yet to be scheduled.
The news comes after ASIC released a “shot across the bow” to lenders last week in a letter warning them of their obligations.
The letter said the regulator “is aware of increasing evidence” suggesting that some consumer cohorts are experiencing financial distress and hardship due to increasing cost of living pressures.
For example, there has been a 28% increase in calls to the National Debt Hotline in 2023 compared to this time last year, and ASIC said surveys indicate that a growing number of consumers are reporting very high levels of financial stress.
Much has also been said about the responsibility on lenders and brokers and what role they play in the hardship process.
The MFAA released a webinar to its members explaining the obligations of brokers last week.
Under the National Credit Code, customers who are experiencing difficulties meeting their repayment obligations under a credit contract may give a lender notice of their inability to meet their obligations. In many instances, after telling the lender of their inability to meet their repayment obligations, the customer and bank will agree on alternative payment arrangements.
Under s 72(4) of the Code, where a credit provider does not agree to change a credit contract in response to a customer’s notice, a credit provider must give the customer a notice advising them of this, the reasons they have not agreed and the consumer’s right to have any complaint regarding the credit provider’s decision considered by AFCA.
This is ASIC’s second action against a credit provider for failure to comply with s 72(4) of the National Credit Code. Action against ClearLoans resulted in a $6 million penalty for financial hardship misconduct.
