Westpac fined $3.64m for breaching lender responsibility rules

Westpac has been fined $3.64 million by the High Court.

Westpac New Zealand has been penalised $3.64 million by the High Court for breaching lender responsibility principles.

The Commerce Commission said the fine arose after “multiple failures” meant customers did not receive legally required information about their loans and, in some cases, agreed interest rate discounts.

Commission director credit Sarah Bartlett said that 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, Bartlett said.

“This is the largest pecuniary penalty imposed under the Credit Contracts and Consumer Finance Act (CCCFA) so far,” she said.

“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.

Bartlett said the result followed the commission’s 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,” she said.

Westpac agreed to admit to the breaches before the commission filing proceedings.

The penalty reflected the fact that Westpac has remediated up to 11,398 impacted borrowers a total of $2.67m.

Under the CCCFA, lenders must disclose specific key information to borrowers and, in some cases, guarantors.

Westpac NZ said it was pleased to have resolved the matter.

The bank self-reported to the Commerce Commission historical issues with some Westpac products in early 2022.

“We worked promptly to close the identified compliance gaps, and we are in the final stages of completing remediation for customers as applicable,” it said.

“Westpac co-operated fully with the Commerce Commission’s investigation and we are pleased to have resolved the matter.”

Last month, the commission also issued a warning to Westpac NZ about 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.

Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.

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