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Know your rights: Westpac answers to the regulator for failing to respond to hardship notices


Westpac is facing court action for its mishandling of online hardship notices that were lodged by its customers struggling financially and seeking a reprieve from their loan payments. Georgia Taylor, Commercial Litigation Senior Associate at Attwood Marshall Lawyers, takes a closer look at the allegations and consumer rights in this space.

Bank hit with court action

The Australian Securities and Investments Commission (ASIC) has launched civil penalty proceedings against Westpac Banking Corporation, one of Australia’s biggest banks.

ASIC is responsible for the regulation of the financial services and consumer credit industries in Australia. While its powers and responsibilities under the Australian Securities and Securities Investment Commission Act 2001 (the Act) extend beyond these industries it has arguably one of the most important regulatory roles within our economy.  

ASIC, colloquially referred to as the “corporate watchdog” filed civil penalty proceedings in the Federal Court of Australia, against Westpac alleging that it failed to respond to online hardship notices lodged by its customers within the time frame required by the National Credit Code.

ASIC claims that customers informed Westpac they were facing unforeseen financial difficulty due to sudden unemployment, severe medical conditions, or caring for family members and sought urgent reprieve from the obligations under their respective credit contracts.

Despite being notified through its own internal systems set up for customers to claim hardship, Westpac in many cases continued with enforcement action against its customers with their hardship claims being ignored.

The case underscores the importance of consumer protection and the legal recourse available when banks fall short of treating customers fairly.

If you believe that your hardship notice has not been handled appropriately or that your bank has not met its legal obligations, you have the right to make a complaint directly to the financial institution or the Australian Financial Complaints Authority (AFCA).

ASIC’s action against Westpac

In the Federal Court action ASIC alleges that Westpac – and its subsidiaries, St George and Bank of Melbourne – did not respond to 229 online hardship notices within the required 21 days between 2015 and 2022, compounding the problematic financial circumstances in which customers had found themselves.

Some customers cited financial troubles because of the knock-on effect of Covid lockdowns or floods, while a single mother on Centrelink benefits couldn’t work due to a severe injury that resulted in finger amputation. Another person struggled to meet their repayments because of the financial burden of their sick daughter’s multiple surgeries and medical care.

Under the National Credit Code (contained in Schedule 1 of the The National Consumer Credit Protection Act 2009 (Cth), a bank needs to respond to a customer within 21 days of receiving a hardship notice, explaining whether it has denied a request for leniency or needs more information before making a decision.

The National Consumer Credit Protection Act 2009 (Cth), also, requires a bank to act efficiently, honestly and fairly in their responses to customers’ hardship notices.

ASIC filed its proceedings on 4 September 2023, alleging Westpac breached both its obligations under the National Credit Code and National Consumer Credit Protection Act  . ASIC is seeking relief under the Act seeking declarations, monetary penalties, and adverse publicity orders against the bank for the alleged misconduct.

While customers were waiting for Westpac to respond to their hardship notices, at least 29 of the customers affected became bankrupt or entered a debt agreement, and six had vehicles and property seized. Westpac took three of them to court to recover mortgaged property.

It is only the second time the regulator has brought an action against a credit provider for failing to comply with S72(4) of the National Credit Code.

The first action was against lender ClearLoans, which had to pay a $6 million fine in February 2023 for mistreating consumers experiencing financial hardship.

What is financial hardship?

Financial hardship can occur when you can no longer make repayments on your credit contracts. If experiencing financial hardship, you have the right to ask for assistance and seek a different repayment arrangement if you are struggling to meet your obligations. That’s whether the financial difficulties are due to unexpected bills, job loss or other unforeseen circumstances.

Hardship notices allow distressed consumers to inform their banks about their financial difficulties. The subsequent investigation can result in changes to the terms of a credit or loan contract, often giving those struggling some relief to get their affairs in order so they can later resume paying off their debts.

When a bank receives a hardship notice, the bank must thoroughly assess the customer’s situation and in many cases, cease enforcement action until that investigation is complete. The review will include an investigation into the customer’s financial circumstances, their ability to meet financial commitments and proposing reasonable solutions.

Your rights

The hardship notices system aims to reduce financial harm to consumers. As a consumer, you have the right to a timely and compassionate response from your bank when you submit a hardship notice.

If a bank decides not to change a credit contract, it needs to explain to the customer why and be able to show that it has carried out sufficient investigation into that individual’s circumstances.

There is also further recourse for consumers whose banks deny applications.

If a customer believes that its request for leniency has been mishandled or unfairly rejected, they can escalate a complaint to the Australian Financial Complaints Authority (AFCA).

Since the filing of ASIC’s claim, Westpac says that since it uncovered the technical issue that caused it to fail to respond to the subject to hardship notices. It has also paid out nearly $900,000 to affected customers through a remediation program that has included refunds of fees and interest, debt waivers and payments for non-financial loss.

While the affected customers have had their complaints resolved, ASIC has filed the action to seek civil penalties as a warning to other credit providers on the seriousness of their failures. The regulator states that it is impossible to make up for all the difficulties faced by customers who had their repayment history information (RHI) and default listings on their credit reports for many years. The same goes for people who went bankrupt or entered into a debt agreement and had their information recorded on the National Personal Insolvency Index and their credit report. The harm done to these individuals cannot be fully fixed or compensated.

Attwood Marshall Lawyers – helping you resolve disputes effectively and recover financial loss

If you are entangled in a dispute with your bank over loan repayments, their handling of hardship notices, irresponsible lending, excessive fees, unsuitable products, or poor financial advice, our team can ensure you understand your rights and guide you in resolving the matter as quickly and efficiently as possible.

Our accomplished Commercial Litigation lawyers can determine if you are eligible for compensation for any financial loss you have suffered. In some circumstances, we can accept your case on a “No Win, No Fee” basis* (approved cases only where a veritable financial hardship exists and claims have a reasonable expectation of success).

For initial advice about your dispute, please call our Commercial Litigation Department Manager, Amanda Heather, on direct line 07 5506 8245, email or free call 1800 621 071 at any time.

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Georgia Taylor - Senior Associate - Commercial Litigation, Racing & Equine Law

Georgia Taylor

Senior Associate
Commercial Litigation, Racing & Equine Law

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The contents of this article are considered accurate as at the date of publication. The information contained in this article does not constitute legal advice and is of a general nature only. Readers should seek legal advice about their specific circumstances. 

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