Westpac has been slapped with a class action over irresponsible lending practices highlighted by the royal commission, and others could soon be met with the same fate.
On Thursday, law firm Maurice Blackburn filed an open class action against Westpac in the Federal Court over the irresponsible lending practices the firm says has left thousands with unsuitable home loans.
The action’s open nature means anyone who received a loan from the bank they believe was inappropriate for their financial circumstances is able to apply to be a part of the action.
While this action marks the first taken against one of Australia’s big four banks over lending practices highlighted during the royal commission, Consumer Action Law Centre chief executive Gerard Brody told The New Daily it may not be the last.
Mr Brody said there have been cases “where big banks all the way to small lenders” have failed to meet their responsible lending obligations, and that other lenders (including the other big banks) are “at risk of similar sorts of claims”.
“All the big banks have had some weak practices when it comes to responsible lending, and I think this was shown in the royal commission,” he said.
A spokesperson for the Australian Financial Complaints Authority (AFCA) also told The New Daily this case will likely be the first in “a long journey for reform and legal action”.
Maurice Blackburn is calling for NAB customers who are struggling to repay or have defaulted on a loan from the bank to get in touch, but a spokesperson for the firm said it presently has no plans for other class actions.
Litigious week for Westpac
Westpac did not respond to questions from The New Daily, but issued a 60-word statement to the ASX after markets closed at 4pm on Thursday.
The statement acknowledged the proceedings filed against the bank, and said it “takes its responsible lending obligations very seriously and will be defending the claims against [Westpac]”.
“Westpac works closely with customers who experience financial difficulty to provide tailored assistance as required,” the statement said.
It’s the second time in a week that legal proceedings relating to the bank have been filed, after regulator ASIC announced on Monday it is appealing against a ruling from February 7 relating to telephone campaigns run by Westpac subsidiaries Westpac Securities Administration and BT Funds Management.
Class actions important
Mr Brody said class actions like the one being led against Westpac were a useful way for consumers to access justice.
“Class actions are a really important mechanism to ensure there is just compensation, and to ensure these businesses aren’t able to profit when they have breached the law,” he said.
“I hope this provides redress to the thousands, if not more, that have been affected by irresponsible lending practices in the past.”
In this particular instance, Mr Brody said while there was some responsibility on the heads of borrowers to ensure they provide accurate information when applying for a loan, the buck stops ultimately with lenders to make sure loans are appropriate.
“I think even Commissioner [Kenneth] Hayne said that consumers are poor historians when it comes to their own financial transactions,” he said.
“Many of us probably don’t – and not out of malice or fraudulent intent – fully understand where our money is going, and that’s why it’s really important for the lenders to do their due diligence. After all, that’s their business.”
The action against Westpac is the third class action levelled at a major financial institution since the conclusion of the commission, with Slater and Gordon leading two others against Commonwealth Bank and NAB.