ASIC took on the case against Westpac because we felt it was important for judicial clarification of a cornerstone legal obligation on lenders. The Credit Act imposes a number of legal obligations on credit providers, including the need to make reasonable inquiries about a borrower’s financial circumstances and capacity to service a loan. Credit providers must also verify the information obtained from borrowers and make an assessment of whether a loan is not unsuitable for the borrower.

On 1 March 2017, ASIC commenced Federal Court proceedings alleging that, during the period between December 2011 and March 2015, Westpac failed to properly assess whether borrowers could meet their repayment obligations before entering into home loan contracts (17‑048MR).

On 13 August 2019, the Federal Court found Westpac had not breached the responsible lending provisions of the Credit Act, as Perram J decided that a lender ‘may do what it wants in the assessment process’ (19‑210MR).

‘ASIC notes today’s majority judgment and will review each of the separate decisions carefully – including what additional measures or clarification may be required to support compliance with the Credit Act,’ said ASIC Commissioner Sean Hughes.

Background

In 2019, ASIC undertook a consultation process to update its responsible lending guidance (19‑342MR). As is ASIC’s usual practice, we will carefully consider the Court’s determination and any revisions that are necessary to our guidance.

• Read the full judgment

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