2018 has unveiled some the worst corruption by the big banks and financial firms in Australia. And while the Banking Royal Commission continues, Westpac has accepted a fine.
But while they’ve ripped off many Australians, is $35 million really enough for the bank to think twice before potentially doing the same thing again in the future?
The bank has agreed to pay the $35 million fine. They admit they wrongly assessed the ability people had to make their repayments.
Westpac is Australia’s second largest lender. The bank admit they either failed to gather the customer data needed to calculate the homeowners ability to repay the loan, or they incorrectly calculated whether the customers’ were able to repay their loans.
This was in relation to roughly 100,000 home loans between 2011 and 2015, ASIC stated.
According to RAW, ASIC chairman James Shipton said:
‘This is a very positive outcome and sends a strong regulatory message to industry that non-compliance with the responsible lending obligations will not be tolerated’.
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Why the Banking Royal Commission criticised ASIC
Widespread misconduct was unveiled throughout the still ongoing Banking Royal Commission. And the fine is a result of the findings against Westpac. These allegations included; charging no service fees, reckless lending and deception of regulators.
Regulators like ASIC were also criticised throughout the royal commission.
ASIC was accused by the head of Australia’s sovereign fund of ‘not [being] awake at the wheel’.
ASIC claimed in a statement that Westpac had breached consumer lending law, by allowing its automated loan approval system not to consider customers’ living expenses when deciding whether people would be able to repay their home loan.
Westpac ignored the living expenses of 50,000 customers and then miscalculated 50,000 more borrowers’ ability to make repayments out of the 260,000 loans they approved in a three-and-a-half-year period.
4% of the total loans included shouldn’t have been approved, ASIC claims.
Westpac is now monitoring these inappropriately approved loans, and Westpac consumer bank chief executive George Frazis stated:
‘Westpac takes its responsible lending obligations very seriously and this action does not relate to our current lending practices’.
This year, it was discovered that out of the four big banks, Westpac had the riskiest mortgage book. And according to analysts, the big four make up about 80% of the Australian market.
While Westpac are finally facing some sort of punishment in regards to their inappropriate approval of home loans, $35 million will only make a tiny dent to a bank who made a half yearly profit of $4.7 billion in 2018.
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