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ASIC alleges that in the period between December 2011 and March 2015 Westpac failed to properly assess whether borrowers could meet their repayment obligations before entering into home loan contracts.
Specifically, ASIC alleges that Westpac:
• used a benchmark instead of the actual expenses declared by borrowers in assessing their ability to repay the loan
• approved loans where a proper assessment of a borrower's ability to repay the loan would have shown a monthly deficit
• for home loans with an interest-only period, Westpac failed to have regard to the higher repayments at the end of the interest-only period when assessing the borrowers' ability to repay.
The National Credit Act provides consumer protections to ensure that credit providers make reasonable inquiries about a borrower's financial situation and assess whether a loan contract will be unsuitable for the borrowers.
The first hearing for the proceedings will be on 21 March 2017 at 9.30am in the Federal Court in Sydney.
ASIC said that it will be making no further comment at this time.
The proceedings follow ASIC's review of interest-only home loans in which the regulator reviewed the responsible lending practices of 11 lenders.