The Federal Court has ordered Westpac Banking Corporation to pay a $26 million civil penalty after leaving vulnerable customers facing financial hardship in the lurch.
The ruling comes after the Australian Securities and Investments Commission (ASIC) launched legal action against the banking giant for failing to respond to more than 200 online hardship requests within the legally required timeframe over a six-year period between 2017 and 2023.
The affected customers belonged to Westpac and its major regional subsidiaries, including St George Bank, Bank SA, and Bank of Melbourne.
Westpac has been hit with a $26 million penalty for failing to respond to customers in hardship. (Getty)
All customers had formally notified the bank that they were struggling to meet repayments on home loans, credit cards, personal loans, and car loans.
Federal Court Judge Timothy McEvoy rejected Westpac’s submission that a $10 million fine was appropriate, labelling that figure “little more than derisory” and “wholly inappropriate”.
In his judgment on Tuesday, Justice McEvoy noted that the breaches were not deliberate and instead stemmed from inadequate systems and operational failures.
However, he still found the bank’s conduct to be “grossly negligent”.
“I accept that Westpac’s contraventions in this case were very serious. They impacted many vulnerable customers and continued over an extended period,” Justice McEvoy said.
“It may in fact be said that the circumstances faced by the affected customers means that their financial vulnerability cannot be overstated… Westpac’s conduct significantly undermined the legislative scheme.”
The court heard that the bank’s failures resulted in severe, real-world consequences.
A number of distressed customers had adverse credit information wrongfully recorded on their files. In other instances, Westpac sold the debts to third-party collectors who actively pursued the vulnerable borrowers.
Pedestrians move past a Westpac Bank in the central business district (CBD) on March 26, 2025 in Sydney, Australia. (Lisa Maree Williams/Getty Images)
ASIC Deputy Chair Sarah Court said the multi-million dollar penalty should serve as a stark warning to the entire banking sector to drastically improve its customer service operations.
“Westpac failed the very customers who needed help when they needed it most,” Court said.
“These were customers who were asking for some breathing room for a range of reasons including domestic abuse, natural disasters, serious illness or the loss of their job. Instead of providing a safety net for these customers, Westpac’s systemic failures let them slip through the cracks.”
Court said that some applicants were left waiting for weeks after the legal deadline, while others received no response at all.
“As Australians contend with a higher cost of living, lenders must prioritise their customers, especially those who are struggling financially,” she said.
Westpac admitted to the breaches, which violated the National Credit Code and the National Credit Act’s mandate to provide services “efficiently, honestly and fairly”.
The bank has since paid more than $1.7 million in remediation to affected customers, covering fee and interest refunds alongside compensation for non-financial loss.
A spokesperson for the bank said: “Westpac acknowledges the Court’s decision. We again apologise to any customers who were affected. We are deeply sorry we let them down.”
“We self-reported these issues in 2022 and 2023 and to put things right, we’ve completed a remediation program including refunds of fees and charges, debt waivers and payments for non-financial loss.
“We have strengthened our processes and upgraded our online hardship systems to meet the standards our customers deserve.”
The ruling marks the latest scalp in an aggressive regulatory crackdown by the corporate watchdog against Australian lenders failing to support borrowers.
Westpac is the second major bank to face massive penalties recently for similar compliance disasters.
ANZ was previously hit with a $40 million penalty for failing to respond to hundreds of customer hardship notices, leaving some waiting for over two years.
Meanwhile, NAB and its subsidiary AFSH Nominees were ordered to pay $15.5 million in August 2025 over legal timeframe failures.
Under Australian law, lenders are legally required to assess hardship notices and provide a formal response if they refuse to alter a credit contract, outlining the reasons alongside details for the Australian Financial Complaints Authority (AFCA).
If you are experiencing financial hardship or struggling with cost-of-living pressures, free support is available. You can contact the National Debt Helpline on 1800 007 007 to speak with a financial counsellor, or visit the federal government’s Moneysmart website.
