Australian Securities & Investments Commission (ASIC) has announced that Westpac will refund $11 million to 13,000 owner-occupier home loan customers.
The move is a response to a Westpac system error, in which customers with interest-only home loans did not have their loan automatically switch to principal and interest repayments at the end of their allocated interest-only period.
According to a release from ASIC, the result of this error means “affected customers did not start paying any principal on their loans at the time agreed with the bank, and now have less time to repay the principal amount of their loans. These customers would also have paid more in interest.”
Westpac will now have to:
- Refund the additional interest customers paid
- Discount the interest rate for the remainder of the loan term
A bad year for the big four banks
According to a release from ASIC, this is due to their failing to provide general or personal advice while charging customers ongoing fees.
Since ASIC’s last public update on the fees-for-no-service project in April 2017, these financial institutions have had to fork over an additional $155 million in payments and offers.
Peter Kell, ASIC Acting Chair, said banks “must ensure proper systems processes and oversight, particularly when it affected important assets such as consumers’ homes.”
“Greater regulatory scrutiny of interest-only loans has led to improvements in how lenders are providing these loans, including in lenders identifying system errors.
“All banks should be reviewing their systems to ensure that they minimise the chance of any such errors occurring, and that any risks to customers are identified early.
“If past errors are identified, remediation needs to be timely, transparent and effective,” said Mr Kell.