Westpac NZ has been fined $3.64 million in the Auckland High Court for breaching lender responsibility laws after multiple failures meant thousands of customers did not receive key information on their loans and agreed interest rate discounts.
The penalty – handed down under the Credit Consumers and Consumer Finance Act – was the largest ever imposed under the legislation.
The legislation said lenders must disclose specific key information during the loan to borrowers and, in some cases, guarantors. Disclosure must be given at different times, including when it was first set up, on an ongoing basis, and if a loan was varied.
Commerce Commission credit director Sarah Bartlett said Westpac failed to invest in “adequate” systems and processes. That failure meant it did not provide the required information to borrowers and guarantors to enable them to make informed decisions.
“This is the largest pecuniary penalty imposed under the Credit Contracts and Consumer Finance Act so far. [It} 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 judgement, Justice Jane Anderson found Westpac’s failures were related to systems “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.”
The court also declared Westpac breached the responsible lending principles in section 9C of the Act.
Bartlett said the result followed a “careful and thorough investigation” by the Commerce Commission into Westpac’s conduct, which it had self reported.
Westpac agreed to admit to the breaches prior to the commission filing proceedings. The penalty also reflected the fact that Westpac has remediated up to 11,398 impacted borrowers a total of $2.67 million, and the conduct additionally affected up to 3012 guarantors.
“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.
In a statement, Westpac said it had worked promptly to close the identified compliance gaps and was in the final stages of completing remediation for applicable customers.
“Westpac co-operated fully with the Commerce Commission’s investigation and we are pleased to have resolved the matter,” a spokesperson for the bank said.
