ASIC takes Westpac to court, alleging it failed to respond to hardship notices in time

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Desperate bank customers in financial hardship were ignored by Westpac when they asked for help, according to a new lawsuit.

The corporate watchdog ASIC is suing the big four bank in the Federal Court, alleging it breached credit laws by failing to respond to hundreds of people in the legally required time frame.

If proven Westpac, Australia’s second-largest lender, could face fines in the millions of dollars.

ASIC said the customers were struggling financially and unable to meet their repayments because they had serious medical conditions, were caring for family or unable to work.

Others were flood victims, recently divorced, or had deaths in the family.

Some of the affected customers are quoted in court documents, including a single mother of two children who receives Centrelink benefits.

She said she was experiencing domestic violence and added:

“I am unable to work as I have had my finger nearly amputated … on my right hand, this led to two surgeries, second due to infection … Several other factors, has put me in financial hardship. I am currently unable to meet other costs of living.”

Another said they were caring for a seriously ill child.

“For the past 2 years my daughter has been suffering with an illness which has resulted in two brain surgeries and two spinal surgeries and numerous procedures in a hospital 2 hours from home which has caused great strain on my finances.”

Some faced serious consequences while they were waiting for Westpac to respond, including being chased for debt collection, ASIC said.

Court documents state at least six customers had vehicles and property seized after submitting their application.

Hundreds of customers received a response too late, ASIC says

The legal action comes as increasing numbers of Australians struggle with mortgage stress.

“Submitting a hardship notice, which results in a change to the credit contract, can be a lifeline for people experiencing challenging financial circumstances,” ASIC Deputy Chair Sarah Court said.

“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.”

According to the lawsuit, Westpac had a serious problem with its online lodging system between 2015 and 2022.

This meant hardship notices submitted by almost 450 people were not sent to a customer assistance team.

For more than half of them, 229 customers did not receive a response within 21 days, as required.

Over 30 times Westpac then declined hardship applications because the bank claimed customers did not provide enough information to support the application, when ASIC alleges that was not the case.

Last month, Westpac posted a net profit of $1.8 billion in the third quarter.

Westpac ‘deeply sorry’ for ‘technology failure’

In a statement, Westpac said it was considering the matters raised by ASIC and has apologised for the “technology failure” which meant it failed the customers.

“This error meant we didn’t provide some of our customers with the help they needed. For this, we are deeply sorry,” Westpac Group chief information officer Scott Collary said.

“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 corporate regulator is alleging Westpac failed to investigate and fix the systemic issues in its online hardship process.

Banks and other lenders have set obligations under the National Credit Code and the National Credit Act when a customer says they are in financial hardship which requires them to respond within a set time frame and to do so, “efficiently, honestly and fairly”.

It is common when a customer is struggling financially that the bank will agree to allow them to change their repayments and negotiate a payment plan.

Bank customers ‘pushed into poverty’, advocacy group says

Stephanie Tonkin, the chief executive of advocacy organisation the Consumer Action Law Centre, welcomed the legal action.

She said hardship requests needed to be treated seriously because of the dire consequences customers could face.

“When people reach out for help to their bank it’s often when they are [at their] most vulnerable, and lenders need to respond swiftly and before things unravel— that’s why there is a 21-day time frame for banks to respond to hardship requests,” she said.

“We hear from callers to our helplines who have been pushed into poverty, with all its devastating impacts, because they haven’t received the hardship response they need.”

Westpac said it had taken steps to assist affected customers.

“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,” Mr Collary said.

“We have strengthened our processes and are upgrading our online hardship applications.”

Westpac added that between 2015 and 2022 it had received 630,000 applications for hardship assistance.

Ms Tonkin said Westpac acknowledging its error was encouraging, but added that “banks as a sector need to do much more to prioritise help for their customers”.

“This is even more important now in a once-in-a-generation cost of living crisis,” she said.

(Original ABC Article)