The Westpac Banking Corp (ASX: WBC) share price has fallen following news that ASIC is taking the ASX bank share to court.
The Australian Securities and Investments Commission (ASIC) is one of the main regulators in charge of monitoring the banks.
Westpac Banking Corp share price
ASIC takes Westpac to court
ASIC has commenced civil proceedings against Westpac in the Federal Court, alleging contraventions under the National Credit Code and the National Consumer Credit Protection Act.
What’s this all about? The proceedings relate to a “technology failure” where ASIC is alleging that 229 applications for hardship assistance submitted between 2015 to 2022 “were not assessed within 21 days” as required by the Credit Code. The ASX bank share noted that it received approximately 630,000 applications for hardship assistance in the same period.
Westpac said it identified the problem itself and self-reported it to ASIC, it’s considering the matters raised by ASIC and has cooperated with the investigation.
The ASX bank share said that after uncovering the issue, it has contacted these customers and completed a remediation program, including “refunds of fees and interest, debt waivers and payments for non-financial loss, totalling approximately $900,000.” A $1 million cost shouldn’t be a big hit for the Westpac share price, but there could be further costs due to the court action.
Management commentary
The Westpac Group chief information officer Scott Collary said:
This error meant we didn’t provide some of our customers with the help they needed. For this, we are deeply sorry.
While we have assisted some of these customers in subsequent contact, it is not good enough that we missed their initial attempt to get in touch.
What to make of this for the Westpac share price
I’m not an expert on credit laws or how this will go. ASIC said in a statement that Westpac “did not do enough to investigate and rectify the systems issues plaguing its online hardship notification process.”
ASIC is “seeking declarations, pecuniary penalties and adverse publicity orders against Westpac from the Court.”
Time will tell how costly this is for Westpac, but the bank itself did not label this announcement as ‘market sensitive’. Even so, something like this regularly seems to happen, which is a hit to its reputation and profit.
I’d look to other sectors for ideas to buy ASX dividend shares for income.
