The Australian Securities and Investments Commission (ASIC) has started civil penalty proceedings in the Federal Court of Australia against Westpac Banking, alleging that the latter failed to respond to customers’ hardship notices within the legally required time.

According to the Commission, 229 customers of the bank did not get a response to their hardship notices within the stipulated 21-day period due to a flaw in its online hardship notice process.

Westpac is alleged to have violated the National Credit Code between 4 September 2017 and 20 March 2022.

Under the code, a lender has 21 days to inform the customer whether it does not agree to change the contract or if it needs more information to make a decision.

Besides, ASIC said that the Australian banking and financial services company violated the National Credit Act by not acting efficiently, honestly, and fairly when it came to responding to hardship notices from customers.

The Commission also claimed that Westpac did not do enough to investigate and fix the systems issues that were affecting its online hardship notification process.

ASIC Deputy Chair Sarah Court said: “Submitting a hardship notice, which results in a change to the credit contract, can be a lifeline for people experiencing challenging financial circumstances.

“ASIC has taken this action to highlight the importance of lenders responding to hardship notices within the required timeframe to reduce harm to their customers.

”Westpac’s failures to respond to these notices compounded their customers’ difficult financial circumstances.”

ASIC said that it is pursuing declarations, monetary penalties, and adverse publicity orders against Westpac through the court.

The date for the first case management hearing has not been decided yet.