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When the Federal Court last month ruled in Westpac's (ASX: WBC) favour in a case brought by the Australian Securities and Investments Commission (ASIC), the bank said the decision brought clarity to how responsible lending obligations could be interpreted.
ASIC had alleged Westpac breached the law in using an automated process based on the Household Expenditure Measure (HEM) to make up to 262,000 home loans, but Justice Nye Perram saw no issue, dismissed proceedings and ordered ASIC to pay the costs.
"Westpac has always sought to lend responsibly to customers and takes its lending obligations very seriously," Westpac's consumer division chief executive David Linberg said at the time.
"This is an important test case for the industry, and we welcome the clarity that today's decision provides for the interpretation of responsible lending obligations."
But now the corporate watchdog is appealing the decision, claiming it brings uncertainty to how lending rules are applied.
"The Credit Act imposes a number of legal obligations on credit providers, including the need to make reasonable inquiries about a borrower's financial circumstances, verifying information obtained from borrowers and making an assessment of whether a loan is unsuitable for the borrower," says ASIC Commissioner Sean Hughes.
"ASIC considers that the Federal Court's decision creates uncertainty as to what is required for a lender to comply with its assessment obligation, nor does ASIC regard the decision as consistent with the legislative intention of the responsible lending regime.
"For those reasons, ASIC will appeal to the Full Court of the Federal Court."
The case related to loans made between December 2011 and March 2015, and alleged Westpac failed to properly assess whether borrowers could meet their repayment obligations before entering into home loan contracts.
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