Tech Glitch Leads to Legal Trouble for Westpac: ASIC Seeks Penalties

On Tuesday, the corporate governance authority in Australia revealed it’s taking Westpac Banking Corp to court. The bank is accused of not meeting mandated time limits to answer customers’ financial hardship requests, spanning years from 2015 to 2022. This situation is at odds with Australia’s National Credit Code, which stipulates that lenders must reply in writing within 21 days to such requests.

The Australian Securities and Investments Commission (ASIC) has begun legal proceedings in the nation’s Federal Court. They argue that due to flaws in Westpac’s digital system for handling these notices, 229 customers didn’t get their responses promptly, as outlined in an official statement from ASIC.

The bank acknowledges that a technology malfunction is tied to these legal developments. They have already initiated a compensation plan that reimburses affected clients for fees, interest, and other non-monetary losses, amounting to about A$900,000 or roughly $581,310 U.S. dollars. This was confirmed by Westpac through an email to Reuters.

ASIC has publicly stated that Westpac should have been more proactive in identifying and resolving the problems in their digital notification system for financial hardship. Westpac’s Chief Information Officer, Scott Collary, has expressed deep regret for the oversight, acknowledging the bank’s failure to deliver timely help to some clients.

According to ASIC, a number of the affected individuals had shared sensitive information with the bank, like job losses and medical issues, and were subjected to debt collection efforts due to the bank’s delayed responses. The regulatory body aims to obtain court-mandated declarations, financial penalties, and bad publicity orders against Westpac.

During the period under scrutiny, the bank received an estimated 630,000 hardship applications. Upon uncovering the lapse, Westpac opted to report it to ASIC on their own accord, as communicated to Reuters.