ASIC chase Westpac for alleged dodgy loans
AN AUTOMATED system that decided if Westpac customers were given a home loan has been questioned by Australian Securities and Investment Commission as it takes the big bank to court.
In ASIC's notice of filing to the Federal Court of Australia, the financial regulator outlined the court case filed on Wednesday, focused on a period between December 12, 2011 to March 2015.
The proceedings follow ASIC's review of interest-only home loans in which ASIC review the lending practices of 11 lenders.
The Federal Court filing read that customers were asked to provide a pay slips or tax returns to show a monthly income, monthly expenses and liabilities including existing loan commitments and credit card debts.
"Westpac undertook, by an automated system, an assessment of the consumer's ability to comply with the financial obligations under the proposed loan," ASIC's court filing read.
"Westpac applied an automated decision system which automatically approved some home loans without any manual assessment and based solely on an automated system; and referred some home loans for manual assessment."
ASIC was focussing on the interest only loans, but stated the automated system used a monthly repayment figure that assumed the repayments would be made over the term of the loan, not over the residual term after the expiry of the interest only period.
"Thus, the serviceablility assessment did not have regard to the residual monthly payments and instead had regard to a lower figure for monthly repayments than the consumer would have to pay after the expiry of the interest only period," the court filing read.
IF YOU had a home loan you couldn't pay off, Australia Securities and Investment Commission might be fighting for you.
Yesterday, ASIC announced it had started civil penalty proceeding against Westpac.
ASIC alleges that in 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.
ASIC claims Westpac used a benchmark instead of the actual expenses declared by borrowers in assessing their ability to repay the loan.
It also claims Westpac approved loans where a proper assessment of a borrower's ability to repay the loan would have shown a monthly deficit.
And for home loans with an interest-only period, Westpac failed to have regard to the higher repayments at the end of the interest-only period when assessing the borrowers' ability to repay.
The first hearing for the proceedings will be on March 21, 2017 at 9.30am in the Federal Court in Sydney.
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