Westpac Banking Corporation has been ordered by the Federal Court to pay $26 million in civil penalties after failing to respond to customers facing financial hardship within the time required by law.
The penalty follows findings that Westpac failed to respond to more than 200 online hardship requests over nearly six years, from 2017 to 2023. The requests came from customers of Westpac and its subsidiaries St George Bank, Bank SA and Bank of Melbourne.
The customers had told the bank they were struggling to meet repayments on products including home loans, credit cards, personal loans and car loans.
What did the Federal Court find?
The Honourable Justice McEvoy found the contraventions were not deliberate, but said they arose from inadequate systems and operational failures.
Justice McEvoy said: “While the contraventions were not suggested to be deliberate and arose instead from inadequate systems and operational failures, I have accepted that they were grossly negligent.”
Some customers waited weeks beyond the legal deadline for a response. Others did not receive a response at all.
In his reasons, Justice McEvoy said Westpac’s conduct was serious because it affected vulnerable customers over an extended period.
“They were the very customers that the hardship provisions of the legislative scheme are designed to protect. Westpac’s conduct significantly undermined the legislative scheme,” he said.
ASIC says harm was compounded
Sarah Court, ASIC Deputy Chair, said the penalty sent a clear message to Westpac and other lenders about their responsibilities to customers seeking help.
“Westpac failed the very customers who needed help when they needed it most,” Court said.
“These were customers who were asking for some breathing room for a range of reasons including domestic abuse, natural disasters, serious illness or the loss of their job.
“Instead of providing a safety net for these customers, Westpac’s systemic failures let them slip through the cracks.”
Sarah Court
Court said delayed or missed hardship responses could worsen customer stress.
“As Australians contend with a higher cost of living, lenders must prioritise their customers, especially those who are struggling financially, and ensure they are given the protections they are entitled to under the law,” she said.
Customers affected by credit reporting and debt sales
The Court found Westpac’s failures led to further harm for some customers. This included adverse credit information being recorded on credit files and some debts being sold to third-party debt purchasers.
Justice McEvoy said those debt purchasers then engaged in conduct to pursue the debts.
“These circumstances add an additional layer of harm, and significance, to Westpac’s conduct,” he said.
The Court rejected Westpac’s submission that $10 million was an appropriate penalty. Justice McEvoy said that amount “would be little more than derisory in the circumstances and therefore wholly inappropriate”.
Westpac admitted contraventions in the proceeding. The bank has also paid more than $1.7 million in remediation to affected customers, including refunds of fees and interest and compensation for non-financial loss.