ASIC has commenced civil penalty proceedings in the Federal Court against Westpac Banking Corporation for failing to respond to customers’ hardship notices within the time required by law.

ASIC alleges 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.

All of these customers told Westpac they were experiencing financial hardship. 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, customers endured debt collection activities by Westpac while waiting for the bank to respond to their hardship notices.

ASIC Deputy Chair Sarah Court 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.’

ASIC alleges that between 4 September 2017 and 20 March 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 alleges 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 claims Westpac did not do enough to investigate and rectify the systems issues plaguing its online hardship notification process.

ASIC 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.

Background

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 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.

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 (23-037MR).

ASIC’s Moneysmart website has information for consumers on what to do if you are experiencing financial hardship. If you're unhappy with either the service received, or with your lender’s decision, you can make a complaint. If you have multiple debts, or would like help applying for financial hardship, contact the National Debt Helpline on 1800 007 007 to talk to a financial counsellor for free.

Editor's note 1:

The matter has been listed for a case management hearing on 27 October 2023.

Editor's note 2:

On 24 October 2023, the Court vacated the case management hearing to be held on 27 October 2023 and made timetabling orders for the parties.

On 27 October 2023, ASIC filed an amended Concise Statement (PDF 1.8 MB) and an amended Originating Application (PDF 388 KB) with the Court.