Westpac cops $26m fine for six-year failure to help customers facing financial hardship

Westpac has been slapped with a whopping $26 million fine for a six-year failure to help customers facing financial hardship.

Federal Court Justice Timothy McEvoy on Wednesday described the big four bank as “grossly negligent” after he found it failed to respond to more than 200 online hardship requests within the time required by law between 2017 and 2023.

The requests were made by Westpac customers, as well as those of subsidiaries St George Bank, Bank SA and Bank of Melbourne.

They had told their banks they were experiencing financial hardship and were struggling to meet repayments on products including home loans, credit cards, personal loans and car loans.

“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,” Justice McEvoy said.

The civil penalty handed down amounts to $130,000 for each customer the bank failed to help within the time mandated by law.

Westpac has since paid more than $1.7m in remediation to affected customers, including refunds of fees and interest and compensation for non-financial loss.

Under the National Credit Code, lenders have 21 days after a customer provides notice — either verbally or in writing — of their inability to meet their obligations to make a determination to vary their repayment arrangements.

The Australian Securities and Investments Commission said some customers waited for weeks beyond that deadline for a response, and in some cases Westpac did not respond at all.

The years covered by the watchdog’s civil suit included the cash crunch of the COVID-19 pandemic and the stimulus-fuelled spike in inflation that triggered the fastest rise in the Reserve Bank’s official interest rates in a generation, which took them from a record low 0.1 per cent in April 2022 to 4.35 per cent by November the following year.

ASIC deputy chair Sarah Court said the penalty sent a clear message for banks to step up and do better when responding to customers who ask for help.

‘Westpac failed the very customers who needed help when they needed it most,” Ms 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.”

Justice McEvoy said Westpac’s contraventions impacted many vulnerable customers “and continued over an extended period”, including affecting their credit rating.

“It may in fact be said that the circumstances faced by the affected customers means that their financial vulnerability cannot be overstated,” he said.

“As is apparent from the Banking Code of Practice, 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.

Westpac had argued a $10m fine was appropriate but Justice McEvoy said that “would be little more than derisory in the circumstances and therefore wholly inappropriate”.