ASIC is taking legal action against Westpac for allegedly failing customers in hardship.

The Australian Securities and Investments Commission (ASIC) has initiated legal proceedings against Westpac Banking Corporation for alleged failures in responding to customer hardship notices, as required by law.

According to ASIC, between 2015 and 2022, Westpac's online hardship notice system fell short, resulting in 229 customers not receiving timely responses within the mandated 21-day period. 

All these customers had informed Westpac of their financial hardships, with many disclosing additional challenges, such as medical conditions, inability to work, or caregiving responsibilities.

Some of these customers even faced debt collection actions by Westpac while awaiting a response to their hardship notices.

ASIC Deputy Chair Sarah Court says; “Submitting a hardship notice, which results in a change to the credit contract, can be a lifeline for people experiencing challenging financial circumstances”.

ASIC alleges that between September 4, 2017, and March 20, 2022, Westpac violated the National Credit Code by failing to notify customers of its decision within the stipulated 21-day window. 

Furthermore, ASIC claims Westpac breached the National Credit Act by not handling these matters efficiently, honestly, and fairly.

ASIC is seeking declarations, financial penalties, and adverse publicity orders against Westpac from the Federal Court, with the first case management hearing date yet to be determined.

In response, Westpac Group Chief Information Officer Scott Collary has expressed regret for the “technology failure” that he says caused the issues. He also stated that the bank had taken steps to assist affected customers, including refunds, debt waivers, and non-financial loss payments totaling around $900,000.

The legal action highlights the growing concern over financial institutions' treatment of customers in hardship situations, with advocacy groups like the Consumer Action Law Centre urging banks to prioritise timely responses to such requests, especially in the face of rising living costs.

If found guilty, Westpac could face substantial fines, potentially in the millions of dollars.

The date for the first case management hearing is yet to be scheduled.