Melanie Mingas| Australian Broker| 11 September 2019
ASIC has filed an appeal with the Full Federal Court of Australia after its responsible lending case against Westpac was dismissed during court proceedings last month.
The loss dealt a significant blow for ASIC: it was the first legal test of the 2009 NCCP Act and the regulator lost on both the facts of the case and its interpretation of the law.
Announcing its appeal, Commissioner Sean Hughes said the court’s decision was not “consistent with the legislative intention of the responsible lending regime”.
“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,” Hughes said in a statement.
“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,” he added.
ASIC commenced federal proceedings against Westpac in 2017, alleging the major bank breached responsible lending laws while assessing the suitability of nearly 262,000 home loans for customers between December 2011 and March 2015.
The case went to trial in May, after Justice Perram rejected a $35m fine agreed between ASIC and Westpac the previous November. Perram said more information was needed to generate an appropriate penalty.
Then on 13 August, Perram dismissed ASIC’s case against the major bank “on facts”, while maintaining that borrowers can cut down on “steak and shiraz” when they take on new financial commitments.
Although the case was based on 262,000 Westpac loans, credit and risk consultant Andrew Tierney calculated that only 10,500 loans went through without full checks. Further, 5,400 of these loans are still with the bank, representing 0.4% of Westpac’s total portfolio – Tierney said these loans are performing “similarly to or better” than the other 99.6%.
In addition to the appeal, ASIC is currently consulting on updates to its responsible lending regulatory guidance – Regulatory Guide 209: Credit licensing: Responsible lending conduct and will issue an update before the end of the year.
The regulator has ramped up its litigation drive over recent weeks, announcing it is also bringing cases against NAB, Bendigo & Adelaide and Bank of Queensland.