ASIC takes Westpac to task over home loan assessments
Westpac will face court over allegations it breached responsible lending laws in its home loan assessments.
The Australian Securities and Investment Commission (ASIC) has brought civil penalty proceedings against Westpac in Federal Court, alleging that Westpac failed to properly assess whether or not borrowers could meet their repayment obligations before entering into home loan contracts. The allegations relate to home loan contracts between December 2011 and March 2015.
ASIC has alleged that Westpac failed to assess borrowers’ ability to repay their home loans based on actual expenses, and instead used a benchmark. It claimed the bank also approved loans where a proper assessment would have demonstrated a shortfall in the borrowers’ ability to repay. ASIC also alleged that, when assessing interest only loans, Westpac failed to take into account the higher repayments at the end of the interest only period.
Westpac has vowed to defend the allegations, and said the seven loans involved in the civil proceedings are all meeting or ahead of their repayment obligations. The bank’s chief executive of its consumer bank division, George Frazis, said Westpac has confidence in its lending standards.
“Our credit policies are informed by our deep experience and understanding of the mortgage market. They include a consideration of customers’ specific circumstances, including income and expenditure, previous repayments history and the overall customer relationship. We build into our processes a range of conservative inputs, including the addition of buffers to take into account possible future interest rate increases,” he said.
Frazis argued that the bank used sophisticated systems in its benchmarking, but also refuted the idea that it did not take borrowers’ declared expenses into account.
The first hearing for the proceedings is set to the place in Federal Court in Sydney on 21 March.