Westpac caved to ASIC today, accepting a $35 mil penalty for breaches to the Consumer Credit Protection act on 50,000 approved loans. The breaches related to an automated system which didn’t factor in the applicants declared expenses, but rather used the Household Expenditure Measure benchmark which has been found to grossly underestimate many peoples weekly expenses. The breach also relates to the calculation of repayments after the interest only period expires on owner-occupier loans. The review found that over 10,000 loans in question should not have been approved.
The penalty, if approved by the Federal Court, will be the largest under the National Consumer Credit act. The banks were sold off today
Westpac (WBC) Chart
Market Matters Take/Outlook
The fine is insignificant to the bank, but does highlight the growing regulation and monitoring of the big 4 in regards to lending. Overall, we remain positive the banks for their cheap trading multiples relative to historical levels and the fundamentals still look solid.
