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Westpac Banking Corporation (ASX: WBC) has been ordered to pay a $26 million civil penalty after the Federal Court found the major bank failed to respond to more than 200 online financial hardship requests from customers over nearly six years.
The penalty, handed down by Justice McEvoy, relates to hardship applications submitted between 2017 and 2023 through Westpac and its subsidiary brands St George Bank, Bank SA and Bank of Melbourne.
The court found the requests were either ignored entirely or not responded to within the timeframes required under the National Credit Code.
"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," said Justice McEvoy.
The requests made by Westpac customers revealed they were experiencing financial hardship and were struggling to meet repayments on products including home loans, credit cards, personal loans and car loans.
The Australian Securities and Investments Commission (ASIC) brought the action against Westpac as part of a broader crackdown on hardship failures by the industry over recent years.
Westpac has since paid more than $1.7 million in remediation to affected customers.
ASIC deputy chair Sarah Court says the penalty reflects the gravity of the bank's failures.
"Westpac failed the very customers who needed help when they needed it most," says Court.
"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."
ASIC says that some customers waited for weeks beyond the legal deadline for a response, while Westpac did not give a response to some customers at all.
"When hardship requests are missed or delayed, the harm compounds and causes even greater customer stress," says Court.
"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."
The $26 million penalty is more than double the $10 million figure Westpac itself had proposed to the court.
Justice McEvoy rejected the bank's submission, describing the proposed amount as "little more than derisory".
"I accept that Westpac’s contraventions in this case were very serious," he said.
"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.
"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.
"These circumstances add an additional layer of harm, and significance, to Westpac’s conduct."
The case is the latest in a string of ASIC enforcement actions against major banks over hardship failures.
In 2025, National Australia Bank (ASX: NAB) was penalised $15.5 million after failing to respond to 345 hardship applications lodged between 2018 and 2023.
ANZ Group Holdings (ASX: ANZ) was hit with a $40 million penalty as part of a $250 million combined penalty package after missing 488 hardship notices, among other misconduct.
ASIC published a report in September last year examining how banks handle financial hardship requests, signalling the regulator's continued scrutiny of the sector's treatment of customers in financial distress.
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