Westpac Banking Corp. agreed to pay a A$35-million fine to settle legal proceedings over alleged breaches of home-loan responsible lending laws.
The bank entered into a settlement agreement with the Australian Securities and Investments Commission to settle the case, which was filed in the country's Federal Court in March 2017. The securities regulator had accused the bank of solely relying on the Household Expenditure Measure benchmark in approving customer loans in violation of laws. The commission alleged the bank did not use consumers' declared living expenses when assessing their capacity to repay home loans.
As part of the settlement, Westpac admitted violating the laws and accepted that 10,500 loans made in the period between December 2011 and March 2015 should not have been approved using its automated decision process and should have been referred to a credit officer for manual assessment.
The bank also admitted that it should have calculated loan repayments for interest-only mortgages based on estimated repayments that would apply after the interest-only period had finished.
Westpac expects to report the impact of the settlement in its 2018 full-year results. The settlement is subject to court approval.
ASIC filed the case following a probe into home loan practices of 11 lenders. The commission did not allege that any customers suffered specific loss or damage as a result of the procedure, and Westpac said no loans were unsuitable for customers at the time of their origination. The bank said the loans continue to perform and are in line with the broader loan book outlook.