Westpac sued by ASIC for allegedly failing to respond to hardship notices

One of Australia’s biggest banks has been taken to court after failing to respond to customers who said they were in financial hardship.

The corporate watchdog has taken Westpac to court after it failed to respond to customers suffering from financial hardship.

Westpac could face millions in fines after the Australian Securities and Investments Commission (ASIC) launched civil penalty proceedings against the bank after 229 customers did not receive a response to a hardship notice within the required 21 days.

A “deficiency” within Westpac’s online hardship notice process has been blamed for the failures, which occurred between 2015 and 2022, with ASIC claiming that the bank did not do enough to investigate and fix the system issues.

ASIC alleges that there were issues with Westpac’s financial hardship notice system, but the did not do enough to investigate and rectify them. Picture: NCA NewsWire / David Geraghty

By law, customers who are experiencing financial difficulty while in a credit contract are able to give a lender notice that they are unable to meet repayment obligations. In many instances, the bank and customer can come to an agreement on an alternative payment arrangement.

If a lender does not agree to change the contract, it must give the customer notice and the consumer has a right to take their complaint to the Australian Financial Complaints Authority.

Many of the customers included details about their difficult circumstances, including inability to work, carer responsibilities or serious medical conditions, according to ASIC.

In some cases, customers were pursued by debt collectors while waiting for a response to their hardship notice.

“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 timeframe to reduce harm to their customers. Westpac’s failures to respond to these notices compounded their customers’ difficult financial circumstances.”

Westpac has acknowledged the proceedings and has apologised over the failure to respond.

“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.

“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.”

It’s the second time this year that ASIC has taken a lender to court over failure to respond to financial hardship requests, with ClearLoans being fined $6m in February over misconduct.

The date for the first case management hearing is yet to be scheduled.