Bank overcharged customers after sending them to debt collectors, court finds
Westpac has been slapped with a $12 million penalty after it and St George Bank overcharged distressed customers after sending them to debt collectors.
The court found that Westpac had repeatedly sent customers to debt collectors, but had wrongly charged interest on those debts, The Australian reported.
The penalty wraps up one of six cases lodged against the bank last year by the Australian Securities and Investments Commission. When ASIC launched the cases in Federal Court in November, deputy chair Sarah Court said the filing of six simultaneous complaints against one bank was “unprecedented.”
“However, these are exceptional circumstances,” she said. “ASIC had numerous Westpac-related matters under investigation through the course of 2021, and we decided to expedite those matters for consideration by the court at the earliest opportunity.”
In the latest case, Westpac and ASIC both agreed to the $12 million penalty, according to The Australian.
The court found that Westpac represented to debt purchasers that a higher interest applied to customers’ loan account balances than was actually the case, The Australian reported. In truth, customers sent to debt collectors were to be charged interest rates lower than Westpac’s rate, as many of them had concessional or promotional rates that were not recorded when they were sent to debt collectors.
The court found that the actions were a result of a systems failure when the bank sold the debt to collectors. However, in joint submissions to the court, both ASIC and Westpac said that the bank “could also have checked the data” it was sending the debt collectors, but failed to do so.
“Westpac ought to have conducted, but failed to conduct, a proper audit of its data extraction processes prior to providing the Sale Files to Debt Purchasers,” the joint submissions said.
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Westpac sold the debts to collectors for $19.87 million, The Australian reported. The debts, which were written off by the bank, totaled $83.6 million. Westpac has paid $17.72 million in remediation to the 16,535 affected customers.
Justice David Beach said that Westpac “as a financial services licence holder and provider of financial services” had failed to comply with its obligations. He said that Westpac was first made aware of the issue in 2016, but it wasn’t escalated to senior leadership until 2018. Westpac didn’t lodge a breach report with ASIC until June 2020, The Australian reported.
“Such delays between 2016 and 2018 were hardly satisfactory,” Beach said.
Westpac was previously hit with a $20 million fine for another of the six cases. The bank is expected to pay almost $113 million in total for the six cases, according to The Australian.
