Under section 72(4) of the National Credit Code, a lender has 21 days to notify the customers if it does not agree to change the contract or if it requires further information to make its decision.

ASIC has alleged that Westpac breached the code by failing to respond within that timeframe and by failing to act efficiently, honestly and fairly when it came to responding to its customers’ hardship notices.

In its concise statement filed to the Federal Court on Monday, ASIC alleged the issues came about as a result of a Westpac system failure and/or IT error.

Westpac group chief information officer Scott Collary has acknowledged the civil penalty proceedings and said the technology failure meant the bank did not provide some of its customers with the help they needed.

“For this, we are deeply sorry,” he said. “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.”

Collary added since uncovering the issue, the bank had contacted affected customers and completed a remediation program including refunds of fees and interest, debt waivers and payments for non-financial loss, totalling about $900,000.

“We have strengthened our processes and are upgrading our online hardship applications,” Collary said.

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ASIC has also alleged that Westpac did not do enough to investigate and rectify the systems issues plaguing its online hardship notification process and is seeking declarations, pecuniary penalties and adverse publicity orders against the bank from the court.

It’s not the first time ASIC has acted against a credit provider for failure to comply with the relevant section of the National Credit Code. In February, the Federal Court penalised ClearLoans $6 million for financial hardship misconduct.

Westpac said it self-reported to ASIC when the incident was identified, had co-operated with its investigation and was considering the matters raised by ASIC.

The bank said it received about 630,000 applications for hardship assistance over the period from 2015 to 2022.

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