Westpac fined $26m for financial hardship neglect

Major bank Westpac has copped a $26 million fine for neglecting customers facing financial hardship over a six-year period.

The Federal Court found the bank failed 277 customers facing financial troubles by not providing a written response to their online hardship notices during the relevant period.

Westpac should have responded to hardship notices within 21 days as required by law.

The Federal Court handed down the pecuniary penalty yesterday, finding the bank "failed to do all things necessary to ensure that the credit activities authorised by the credit licence were engaged in efficiently, honestly and fairly." It also "failed to comply with consumer credit law."

Customers, who were struggling to meet repayments on home loans, credit cards, personal loans and car loans, contacted the bank on financial hardship grounds between 2017 to 2023 via subsidiaries St George Bank, Bank SA and Bank of Melbourne.

Westpac blamed the oversight on "technology failure".

On the contrary, Justice McEvoy said, "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."

"A particularly serious aspect of Westpac's contraventions is that they caused a number of customers to have adverse credit information recorded on their credit files, and debts to be sold to third-party debt purchasers who then engaged actively in conduct to pursue those debts," the judge said.

"These circumstances add an additional layer of harm, and significance, to Westpac's conduct."

Furthermore, Justice McEvoy rejected Westpac's suggestion that $10 million was an appropriate penalty, saying it "would be little more than derisory in the circumstances and therefore wholly inappropriate."

"I am satisfied also that there are several other circumstances that justify a significant penalty. Westpac's size, the level of its profits and its market position are relevant to a consideration of what may be considered as an acceptable cost of doing business," Justice McEvoy added.

Westpac made admissions of contravention in the proceeding and paid more than $1.7 million in remediation to affected customers, including refunds of fees and interest and compensation for non-financial loss.

ASIC deputy chair Sarah Court commented Westpac failed the very customers who needed help when they needed it most.

"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," she said.

Westpac has since committed to funding and implementing new technology systems and processes for receiving and responding to online hardship notices.

"Westpac acknowledges the court's decision. We again apologise to any customers who were affected. We are deeply sorry we let them down," a Westpac spokesperson said.

"We self-reported these issues in 2022 and 2023 and to put things right, we've completed a remediation program including refunds of fees and charges, debt waivers and payments for non-financial loss.

"Over the period in question Westpac received approximately 695,000 requests for hardship assistance. We take our obligations seriously and have taken action to ensure we help our customers when they need it most."