Australia's Federal Court dismissed the Australian Securities and Investments Commission's responsible lending case against Westpac Banking Corp.
Justice Nye Perram found in favor of Westpac and dismissed the ASIC's proceedings with costs, the Australian bank said.
ASIC commenced proceedings against Westpac on March 1, 2017, alleging that the bank's automated assessment system used a benchmark, namely the Household Expenditure Measure, for consumer expenses and did not have regard to the actual expenses provided by the consumer. The regulator also alleged that when Westpac assessed home loans with an interest-only period, it did not acknowledge the higher repayments at the end of the interest-only period, as required.
Westpac had previously agreed to an A$35 million settlement with ASIC in connection to the case, but the Federal Court rejected the settlement in November 2018.
Perram found that Westpac did take account of consumers' declared living expenses because another rule in Westpac's system compared declared living expenses to income, according to the ASIC.
The commission said the case is a "test" and was taken on due to the need for "judicial clarification of a cornerstone legal obligation on lenders." The regulator said it is "reviewing the judgment carefully."