Westpac NZ penalised $3.64 million for not being a responsible lender
System design called ‘foreseeably deficient’.
Westpac New Zealand Ltd has been penalised $3.64 million by the High Court for breaching lender responsibility principles, after multiple failures meant customers did not receive legally required information about their loans and, in some cases, agreed interest rate discounts.
Commerce Commission Director, Credit Sarah Bartlett says by failing to invest in adequate systems and processes Westpac did not provide the required information to borrowers and guarantors to enable them to make informed decisions.
Westpac also failed to have adequate systems, processes and controls in place to ensure that it honoured interest rate discounts it had agreed to with customers on their home loans.
“This is the largest pecuniary penalty imposed under the Credit Contracts and Consumer Finance Act so far,” Ms Bartlett says.
“The pecuniary penalty sends a strong message not only to Westpac but to the consumer credit industry that continued failings to adequately invest in robust systems and compliance practices will not be tolerated and there are serious consequences for not complying with the Act.”
In her judgment, Justice Anderson found Westpac’s failures related to systems that were “set up in a way that was foreseeably deficient”.
“Multiple steps could have been taken to prevent the harm, including changes to the systems, adequate staff training, and mechanisms to identify and respond where disclosure was not provided, and discounts were not applied,” she found.
The Court also made declarations that Westpac breached the responsible lending principles in section 9C of the Act, which is consistent with the admissions made by Westpac.
Ms Bartlett says the result follows the Commission’s careful and thorough investigation into the conduct, which was self-reported by Westpac.
“As with any self-report, our ability to progress an investigation is contingent on receiving complete and timely information to progress the investigation.”
Westpac agreed to admit to the breaches prior to the Commission filing proceedings. The penalty reflects the fact that Westpac has remediated up to 11,398 impacted borrowers a total of $2.67 million. The conduct also impacted up to 3,012 guarantors.
A copy of Justice Anderson’s judgment will soon be available on the case register.
Background
Under the CCCFA, lenders must disclose specific key information to borrowers and, in some case, guarantors.
Disclosure must be given to the borrower at different times during the loan, including when it is first set-up, on an ongoing basis, and if a loan is varied.
More information about lenders' disclosure obligations can be found on the Commerce Commission's website.
Recently, the Commission also issued a warning to Westpac New Zealand Limited for a potential breach of the Fair Trading Act 1986.
That investigation considered whether the bank’s failure to apply the benefits of its ‘Work Hard Play Hard’ promotional campaign to its customers’ credit card accounts breached the Fair Trading Act.