Westpac decision a good win for lenders

  • By Christine St Anne

ASIC lost again its responsible lending appeal and the decision by the Federal Court is seen as a win for lenders.

In September last year, the corporate regulator filed an appeal with the Federal Court of Australia against the decision of Justice Perram regarding ASIC’s allegations against Westpac Banking Corporation (Westpac) for contraventions of responsible lending provisions of the National Consumer Credit Protection Act 2009 (Cth) (Credit Act).

The matter was heard in February 2020 and on Friday the Full Federal Court handed down its majority decision two to one dismissing ASIC’s application.

CoreLogic head of research Tim Lawless sees the decision as a win for lenders.

“I think any lender would have a very clear understanding around the lending guidelines and prudent lending standards,” Lawless said.

“Now it will really be about ensuring the application process and approval process for a borrower is as flexible as possible and allows for some level of internal assessment beyond a very simple expenses or revenue minus expenses formula.”

Lawless said it was very important for lenders to be able to use discretion when assessing a borrower’s ability to repay the loans.

“I would fully agree with the original judgment made about by Justice Perram who made the comment [around Shiraz and Wagyu beef].  

“It is reasonable to expect that people can adjust their spending, especially for discretionary expenses. It’s a good win for Westpac and it’s a good win for lenders. It is a rational and reasonable outcome.

It could also help ease lenders concerns around lending, particularly crucial in the current environment.

On Friday, the Prime Minister met with the major banks to discuss how they were managing challenges under the health pandemic.

The Australian Financial Review reported that the Reserve Bank Governor Philip Lowe had urged banks to keep lending at the meeting.

ASIC said it was assessing its options and to date it is unclear whether the matter will be referred to the High Court.

“It was a split decision [in the second round of hearings in the Federal Court].

“ASIC are probably weighing up the odds of a  win in the High Court.

“But to date, this action has been very expensive for ASIC.

“Taking it to the High court is not a guaranteed outcome and it looks like the odds would be stacked up against ASIC again.”