Westpac has been ordered to pay a $26 million civil penalty after the Federal Court found the major bank repeatedly failed to properly handle hardship requests from borrowers.
The case, brought by the Australian Securities and Investments Commission (ASIC), centred on hundreds of customers of Westpac (and its subsidiaries St.George, BankSA and Bank of Melbourne), who lodged online hardship notices between 2017 and 2023 but did not receive timely decisions on whether their loan or credit terms would be adjusted.
Six years of missed hardship pleas
The court heard that more than 200 hardship requests went unanswered within the timeframe set out in the National Credit Code (21 days), and in some instances, borrowers received no response at all.
Under the legislative framework, a borrower who can no longer meet their obligations can notify the lender and ask for a variation to their credit contract.
If the lender declines that request, it must write to the customer, explain the reasons, and direct them to AFCA if they wish to escalate the dispute.
The affected customers held products ranging from home loans to credit cards, personal loans and car finance, and had told the bank they were struggling to keep up with repayments.
ASIC told the court that some customers waited weeks beyond the legal decision deadline, while others were simply left in limbo.
Westpac admitted it breached those requirements, as well as its broader obligation under the National Credit Act to provide credit services efficiently, honestly and fairly.
Justice McEvoy said he accepted that the failings stemmed from poor systems rather than an intentional refusal to help, but stressed that this did not diminish their seriousness.
“While the contraventions were not suggested to be deliberate and arose instead from inadequate systems and operational failures, I have accepted that they were grossly negligent,” he said.
Justice McEvoy highlighted that the borrowers affected by these failures were exactly the cohort the hardship regime was designed to protect.
“I accept that Westpac’s contraventions in this case were very serious. They impacted many vulnerable customers and continued over an extended period. It may in fact be said that the circumstances faced by the affected customers means that their financial vulnerability cannot be overstated,” McEvoy said.
He also focused on the knock‑on consequences beyond the initial failure to respond.
“A particularly serious aspect of Westpac’s contraventions is that they caused a number of customers to have adverse credit information recorded on their credit files, and debts to be sold to third-party debt purchasers who then engaged actively in conduct to pursue those debts,” he said.
“These circumstances add an additional layer of harm, and significance, to Westpac’s conduct.”
A $26-million penalty
Westpac had argued that a $10 million civil penalty would be sufficient recognition of its wrongdoing and pointed to the fact the contraventions were unintentional.
Justice McEvoy dismissed that figure as far too low, stating that a $10 million sanction “would be little more than derisory in the circumstances and therefore wholly inappropriate.”
Instead, the court imposed a $26 million penalty to reflect the scale and duration of the breaches and their impact on customers.
Westpac has also paid more than $1.7 million in remediation, including refunds of fees and interest and compensation for non‑financial loss.
Speaking of the penalty, ASIC deputy chair Sarah Court said the outcome should serve as a warning to all lenders that hardship obligations are central to their licence conditions.
“Westpac failed the very customers who needed help when they needed it most,” Court said.
“These were customers who were asking for some breathing room for a range of reasons including domestic abuse, natural disasters, serious illness or the loss of their job.
“Instead of providing a safety net for these customers, Westpac’s systemic failures let them slip through the cracks.”
She continued: “When hardship requests are missed or delayed, the harm compounds and causes even greater customer stress.
“As Australians contend with a higher cost of living, lenders must prioritise their customers, especially those who are struggling financially, and ensure they are given the protections they are entitled to under the law,” Court outlined.
Part of a broader pattern on hardship enforcement
The Westpac judgment is the latest in a series of cases where courts have penalised lenders for failures in their hardship processes.
In 2025, National Australia Bank (NAB) and its subsidiary AFSH Nominees were hit with a combined $15.5 million penalty after the Federal Court found they did not respond to hardship notices within the required time.
Australia and New Zealand Banking Group (ANZ) faced a $40 million sanction for not properly handling hundreds of hardship requests and for broader shortcomings in its systems.
Non‑bank lender Resimac has likewise been sanctioned over the way it dealt with thousands of hardship applications.
[Related: ASIC flags concerns over lenders’ hardship practices]
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