Westpac was singled out by ASIC as being the most recalcitrant of the major banks after it refused to comply with ASIC guidelines on credit card credit limit upgrades from 2012, the financial services royal commission has heard.

In an internal note briefing to staff before a meeting with Westpac CEO Brian Hartzer, the regulator made the following observation: “Of the big four banks, Westpac appears most resistant to ASIC and the laws we administer.

“Across … multiple dealings with Westpac there is a sense that they only tell us about issues when they think we are likely to find out about them through other means and they are reluctant to give us any more than the minimum possible amount of information.”

ASIC’s frustration with the bank had its genesis in 2011 when the regulator conferred with the banks about minimum standards for regulating credit card limit increases.

It came out in September 2012 with a position that the banks should verify with customers their current employment status before agreeing to credit limit increases.

At this point Westpac had been making unsolicited offers to existing customers to increase credit limits up to $5000 without any verifying information about income and employment.

The bank around this time reviewed its situation and took the view that restrictions on unsolicited marketing information did not apply to these offers of increased credit limits as they could be characterised as “account management” functions.

Westpac credit card chief William David Malcolm told the commission that there was a difference of opinion within the bank over the validity of ASIC’s restrictions with the product sales area saying they were not applicable while compliance staff said they should be adhered to.

They were not and a review of Westpac operations in 2014 lead to startling observations from ASIC’s viewpoint.

“[ASIC compliance staff] went back to the whole industry at the beginning of 2014 to assess the level of compliance and what issuers were doing above the bare minimum.

“To their surprise they discovered that Westpac was not even doing the bare minimum. That is, it was not asking customers any questions before increasing their credit card limit.”

Mr Malcolm, in response to numerous questions from counsel assisting Eloise Dias, admitted that in retrospect Westpac should have complied with the regulator’s view.

After a series of discussions with the regulator Westpac agreed to comply and by March 2015 was rolling out a new system that was in line with the law.

It made agreements with the regulator to remediate the situation with 6612 clients who had been affected. Of these, 3397 who were deemed to have suffered hardship were remediated to the total value of $11.3 million by February 2017.

Recompense included reducing balances by debt amounts above the credit limit increase and refunds of interest and charges.

Westpac told ASIC it had profited to the tune of $23 million between 2011 and November 2014 from the credit invitations made to about 2.4 million customers. Some 247,000 took up the offer.