In response to ASIC's concerns, Westpac has improved its lending practices when providing credit card limit increases to customers. Westpac has also committed to a remediation program that includes proactive customer refunds, and a contribution of $1 million over four years to support financial counselling and literacy.

ASIC was concerned that Westpac failed to make reasonable inquiries about some consumers' income and employment status before increasing their credit card limit. In particular, ASIC was concerned that Westpac, in relying largely on its automated processes, was not making reasonable inquiries of individual cardholders, which is not consistent with the responsible lending obligations under by the National Consumer Credit Protection Act 2009 (the National Credit Act).

Westpac has committed to a number of steps to address ASIC’s concerns including:

• Changing its credit limit increase processes to ensure that, at a minimum, reasonable inquiries are made about a customer's income and employment status to ascertain their financial situation before the limit is increased.
• A remediation program involving a review of credit limit increases previously provided where a cardholder experiences financial difficulty, with consumer refunds paid where appropriate.
• Engaging an independent external expert to provide assurance of the effectiveness of the remediation program. 

Westpac will also make a $1 million payment to support financial counselling and financial literacy initiatives.

Michael Saadat, Senior Executive Leader of Deposit Takers, Credit and Insurers said, ‘Credit card issuers, like all consumer credit providers, have to meet obligations under responsible lending laws.'

‘ASIC maintains an ongoing focus on compliance with these laws. Where we see non-compliance, we will take action, including taking steps to ensure affected consumers are appropriately remediated.’

ASIC acknowledges the co-operation of Westpac in resolving this issue, including suspending its sending of credit limit increase invitations until ASIC's concerns were resolved and Westpac's processes improved.

Westpac credit card customers who have any questions should contact, depending on the brand:

• Westpac 1300 363 503
• St.George 1300 369 877
• BankSA 1300 365 502
• Bank of Melbourne 1300 656 698

Background

ASIC has been engaging closely with credit card issuers following the introduction of the National Credit Act. In 2014, ASIC conducted a review focussing on credit card providers' invitations to customers to increase credit card limits. ASIC’s concerns with Westpac’s processes were identified through the course of this review.

ASIC has provided guidance to industry in Regulatory Guide 209 Credit licensing: Responsible lending conduct (RG 209). RG 209 was last updated in November 2014, and reflects the Federal Court decision in ASIC v The Cash Store (in liquidation) [2014] FCA 926.

The action taken with respect to Westpac follows a number of developments and outcomes involving responsible lending:

• Bank of Queensland Limited improved its lending practices following ASIC's concerns about the way it assessed applications for home loans (refer: 15-125MR).
• The Cash Store Pty Ltd and Assistive Finance Australia Pty Ltd failed to comply with their responsible lending obligations. The Federal Court awarded record civil penalties (refer: 15-032MR).
• Wide Bay Australia Ltd (now Auswide Bank Ltd) made changes to their responsible lending policy as a result of ASIC's intervention (refer: 15-013MR).
• ASIC released its report into interest-only home loans to help credit licensees improve their lending practices by increasing their awareness of obligations (REP 445).