ASIC files appeal against the Westpac 'responsible lending' Federal Court decision

ASIC files appeal against the Westpac 'responsible lending' Federal Court decision
ASIC files appeal against the Westpac 'responsible lending' Federal Court decision

ASIC has filed an appeal with the Full Federal Court of Australia against the decision of the Honourable Justice Perram regarding ASIC’s allegations against Westpac for contraventions of responsible lending provisions of the National Consumer Credit Protection Act 2009 (Credit Act). 

It has been dubbed the 'wagyu and shiraz' case.

Federal Court judge Nye Perram's judgment noted: “I may eat Wagyu beef every day washed down with the finest shiraz but if I really want my new home I can make do on much more modest fare”.

Justice Perram rejected ASIC’s action against Westpac.

ASIC had alleged that Westpac breached the laws by failing to properly take account of customers' individual declared expenses when they were applying for home loans.

It instead relied on a benchmark Household Expenditure Measure (HEM), which was criticised at the earlier banking royal commission as set too low for many customers.

By using the benchmark, thousands of Westpac customers were given loans larger than they would have been granted had the bank assessed them on their actual living costs.

On 1 March 2017, ASIC commenced Federal Court proceedings alleging, during the period between December 2011 and March 2015, Westpac failed to properly assess whether borrowers could meet their repayment obligations before entering into home loan contracts.

On 13 August 2019, the Federal Court found Westpac had not breached the responsible lending provisions of the Credit Act, as Perram J decided that a lender ‘may do what it wants in the assessment process’.

 ‘The Credit Act imposes a number of legal obligations on credit providers, including the need to make reasonable inquiries about a borrower’s financial circumstances, verifying information obtained from borrowers and making an assessment of whether a loan is unsuitable for the borrower. ASIC considers that the Federal Court’s decision creates uncertainty as to what is required for a lender to comply with its assessment obligation, nor does ASIC regard the decision as consistent with the legislative intention of the responsible lending regime. For those reasons, ASIC will appeal to the Full Court of the Federal Court’, said ASIC Commissioner Sean Hughes

ASIC is currently consulting on updates to its responsible lending regulatory guidance – Regulatory Guide 209: Credit licensing: Responsible lending conduct . In February this year ASIC released a consultation paper. ASIC received 72 submissions, with 64 non-confidential submissions published on the ASIC website.

As part of our consultation ASIC recently conducted public hearings. In these hearings, ASIC heard from industry representatives, consumer groups, academics and service providers. Industry indicated it would appreciate the guidance including further clarification to assist it in complying with its obligations, for example by the use of additional case studies and examples. The hearings also highlighted that industry supports the continuation of guidance giving licensees flexibility.

ASIC intends to publish an updated RG 209 by the end of the year.

Joel Robinson

Joel Robinson

Joel Robinson is a property journalist based in Sydney. Joel has been writing about the residential real estate market for the last five years, specializing in market trends and the economics and finance behind buying and selling real estate.

Asic Westpac

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