Westpac blames tech system failures for Credit Code breach

Westpac Customer Hardship

Corporate regulator ASIC has initiated civil proceedings against Westpac for its alleged failures to respond to customers’ hardship requests, with the bank blaming the potential compliance breach on technology failures and insufficient upgrades to legacy systems.

ASIC alleges that between 2015 and 2022 Westpac failed to respond within the required 21-day timeframe to 229 customers that had lodged hardship notices. An ASIC filing to the Federal Court revealed that a further 219 customers were also affected by the hardship systems failure.

Westpac blamed its response failures on a deficiency within its online hardship notificiations system, identifying a disconnect between back-end processing systems.

ASIC blasted the bank’s failure to respond to customers’ hardship requests, which it said had detrimentally affected an already financially vulnerable cohort.

“All of these customers told Westpac they were experiencing financial hardship. Many of these customers also told Westpac about their difficult circumstances and vulnerabilities, including their inability to work, the impacts of serious medical conditions or their carer responsibilities,” the regulator wrote in a statement.

“In some cases, customers endured debt collection activities by Westpac while waiting for the bank to respond to their hardship notices.”

ASIC added: “Each affected notice customer was denied the opportunity to have their online hardship notice determined at the relevant time when they were most at risk of experiencing further or ongoing financial hardship and stress.

“It should be inferred that Westpac’s failure to respond to each affected notice customer’s online hardship notice caused each customer to experience further financial hardship and stress.”

Westpac acknowledged the civil penalty proceedings and alleged contraventions of both the National Credit Code and the National Consumer Credit Protection Act.

Under the Code, a lender has 21 days to notify the customer who submits a hardship request if it either does not agree to change the contract or if it requires further information to make its decision.

Additionally, under the National Credit Act, lenders are obligated to act “efficiently, honestly and fairly” when responding to customers’ hardship notices.

System failures

ASIC noted persistent deficiencies (during the period in question) in Westpac’s systems and processes for managing online hardship notices – with the regulator citing numerous times an audit report released internally by the bank in June this year.

The regulator also highlighted Westpac’s self-acknowledged concerns regarding its “complex multiple legacy technology platforms and underinvestment in modern simplified technology infrastructure”.

It added that Westpac “does not have a consolidated system view of customers for collections and hardship and inadequate progress in business (and technology) simplification of the multi-brand, multi-systems legacy environment due to years of under-investment.”

Systems disconnect

Hardship requests are typically submitted by individuals who are struggling to repay a bank loan so that they may renegotiate their repayment terms.

Westpac customers are able to lodge these requests via the bank’s website, which is then processed internally by the its ‘OneClick’ system.

These notices are then on-sent to other systems, including the ‘Tallyman’ collection system, to be processed manually by Westpac’s Customer Assist team.

The audit found that hardship applications submitted through OneClick were failing to transmit to Tallyman.

“This issue was raised from the first online hardship incident. It was identified that no reconciliation between OneClick and Tallyman was in place,” the audit revealed, adding that “online customer hardship requests are not always sent to collections systems for [the Customer] Assist [team] to action.”

As a result, the audit revealed, there was a “delay in the outcome provided to customers, or no outcome being provided”.

Westpac’s managing staff appeared to be aware of concerns with the hardship request system, with the audit noting that “multiple historical incidents and application reconciliation control gaps and weaknesses” were identified and raised by management regarding the system’s deficiencies.

Westpac noted that the “root cause” of this system disconnect was eventually addressed “through a targeted fix”.

The regulator noted that Westpac has since remediated 448 affected customers to the tune of more than $679,000, with an additional non-financial loss compensation payment of more than $274,000 to affected customers.