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The big bank agreed to pay the fine admitting to using its ‘automated decision system’ to give out loans. Westpac admitted to using the Household Expenditure Measure (HEM) to calculate living costs, breaking responsible lending provisions of the National Credit Act.
The Australian Securities and Investments Commission (ASIC) believes this would be the largest civil penalty awarded under the National Credit Act, if approved.
The automated decision system allowed customers to be approved for home loans, without proper procedure, potentially putting them in financial hardship.
An estimated 10,500 loans were approved through Westpac’s automated decisioning process and referred to a credit officer for manual assessment
ASIC chairman James Shipton said the fine sets an example, as non-compliance with regulatory rules will not be tolerated.
“This outcome, and ASIC’s actions in relation to responsible lending, reinforce that all lenders must obtain information from individual borrowers about their financial situation to ensure that they can properly assess the ability of the customer to repay the loan.’’ Mr Shipton said.
Westpac changed its systems in 2015 and says it has “confidence in the credit quality” of the loans it issued out.
Chief Executive, Consumer Bank, George Frazis said: “Westpac takes its responsible lending obligations very seriously and this action does not relate to our current lending practices. We upgraded our credit assessment in 2015 and continue to thoroughly assess home loan applications.
Westpac shares were down 1% in the afternoon trading on Tuesday, while the broader market was down 0.4 %.