Westpac faces responsible lending class action
Westpac is facing the first class action against a major bank in the wake of the Hayne royal commission into financial misconduct, with plaintiff firm Maurice Blackburn taking on the bank over responsible lending.
Maurice Blackburn on Thursday said it had filed the lawsuit, and the lead claimants in the case would be Queensland couple Ian and Michelle Tate, who borrowed $1.8 million from the bank across five properties between 2008 and 2016.
According to a report on the ABC last year, the couple found their applications had underestimated their living expenses. The class action alleges the bank did not comply with its responsible lending obligations in making the loans.
Westpac, which has been approached for comment, is expected to defend the claim.
Maurice Blackburn has signed up a litigation funder, Harbor, to finance the action, which will focus on loans granted to customers after January 2011. The law firm is alleging certain loans made by the bank after January 2011 were "unsuitable" for customers, but has not yet provided further details.
“Westpac is required to comply with strict obligations which are specifically designed to protect consumers from irresponsible lending and the risk of financial hardship. This case will seek to prove that Westpac failed to comply with these obligations and that this failure caused substantial losses for many consumers,” said principal lawyer at Maurice Blackburn, Ben Slade.
The law firm highlighted an unresolved legal battle between Westpac and the Australian Securities and Investments Commission (ASIC) over allegations the bank did not properly assess customers for loans.
ASIC and Westpac reached a settlement in the case last year, but the Federal Court sensationally refused to approve the settlement after finding ASIC and the bank could agree exactly how, or how many times, Westpac had broken the law.
The law firm also highlighted the royal commission's criticism of banks for being over-reliant on an external benchmark for consumers' living expenses, known as the Household Expenditure Measure (HEM). Commissioner Kenneth Hayne's final report did not reccomend changes to responsible lending laws or use of the HEM.
“Westpac’s response to Commissioner Hayne’s findings in the Financial Services Royal Commission, and to the ongoing proceedings brought by ASIC in relation to Westpac’s responsible lending obligations does not reveal any acceptance by Westpac of its obligations to compensate those who have suffered, and are suffering, at the hands of the company,” Mr Slade said.
At the time of its failed settlement with ASIC last year, Westpac accepted that it should not have used an automated process to approve 10.500 loans between December 2011 and March 2015, saying these should have gone to a credit officer for manual assessment. However, the bank did not admit that any of the loans it had made were unsuitable for customers.
More to come