Major bank cracks down on living expenses

In a note sent to aggregators this week, Westpac and its subsidiaries revealed that from Tuesday, 17 April, the group will update its credit policies to enhance the way it captures living expenses and commitments as well as verifies documentation.

“ApplyOnline (AOL) as well as aggregator systems will be updated to cater for these changes to our credit policies,” the bank said.

“The number of expense categories will increase from six to 13. This will allow you to have more detailed conversations with your customers to better understand their financial situation.

“Customers will need to produce more documentation with their loan applications to support their stated outgoings and debts. All checklists will be updated with these enhanced requirements.”

Westpac will also introduce a new Financial Acknowledgement form, which will detail the income, expenses and liabilities the customer has told their broker.

“Customers will need to sign and date this form before sending it back to us as part of their loan offer documentation,” the bank said.

From 16 April, brokers will be tasked with making sure that all applicable expense categories have been entered. Comments must be provided where a zero sum is given for a particular expense.

Westpac said that brokers must “make detailed enquiries and capture the customer’s response to ensure we have an accurate view of the applicant’s living expenses” and ask customers to provide acceptable verification documents for applicable outgoings and debts.

The policy changes come as the mortgage industry faces ongoing scrutiny around customer living expenses.

Home loans were targeted during the first round of the financial services royal commission, where ANZ was accused of being non-compliant with the NCCP by not verifying inconsistent living expenses.

UBS researchers this week warned that banks could tighten their income and expenses assessments for mortgage borrowers off the back of the royal commission, which could result in “a sharp reduction in credit availability” and could negatively impact the economy.

[Related: Bank tightening could result in ‘credit crunch’]