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Westpac Banking Corporation (Westpac) has allegedly seized property from those it failed to process hardship requests from, according to civil proceedings from the Australian Securities and Investments Commission (ASIC) filed in the Federal Court.
The financial services regulator has alleged that the major bank breached its obligations under the National Credit 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 has alleged that between 2 October 2015 and 20 March 2022, Westpac’s hardship notice process failed, resulting in 229 Westpac Group customers (covering Westpac, St.George, Bank of Melbourne, and BankSA) not receiving a response to their hardship notice within the required time frame of 21 days.
Under s 72(4) of the National Credit 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.
However, the regulator said that, in some cases, Westpac Group customers endured debt collection activities by the bank while waiting for it to respond to their hardship notices.
In the court filing, the regulator revealed that hardship assistance was being sought by borrowers due to a range of reasons, including redundancies, COVID-19 lockdowns and isolation as well as divorce and relationship breakdowns (resulting in a single remuneration needing to service loans taken on with dual incomes).
In ASIC’s notice of filing to the Federal Court, the regulator stated that “at least six customers had assets (vehicles) and property seized after submitting their online hardship notice, which includes one of three customers against whom Westpac commenced court proceedings” to recover the mortgaged property.
The regulator claimed that at least 29 affected customers became bankrupt, or entered a debt agreement, after submitting their online hardship notice. However, the regulator added that Westpac has since made “some effort to remediate these customers”.
ASIC deputy chair Sarah Court commented: “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 time frame to reduce harm to their customers. Westpac’s failures to respond to these notices compounded their customers’ difficult financial circumstances.”
In an ASX release on Tuesday morning (5 September), Westpac acknowledged the civil penalty proceedings commenced by ASIC in the Federal Court, which it confirmed related to a “technology failure in which ASIC alleges 229 applications for hardship assistance” were not assessed within 21 days.
Westpac chief information officer Scott Collary said individuals not having their hardship applications processed was due to a technology error.
He stated: “This error meant we didn’t provide some of our customers with the help they needed. For this, we are deeply sorry.
“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.
“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.
“We have strengthened our processes and are upgrading our online hardship applications.”
Westpac added that once it had identified the incident, it self-reported it to ASIC and had cooperated with the commission’s investigation.
The major bank also revealed that it had received approximately 630,000 applications for hardship assistance between 2015 and 2022, the period when the 229 applications were alleged to have not been assessed.
The action comes after the commission recently urged banks to improve customer hardship support.
[Related: ASIC urges banks to improve customer hardship support]
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