13 Sep Tension over ASIC court bid
Alex Druce – The Daily Telegraph – Friday 13 September
THE corporate watchdog says it is acting in the interests of the “broader economy” in appealing the Federal Court’s decision to throw out a responsible lending lawsuit against Westpac.
But Federal MPs have questioned whether the regulator is creating uncertainty for borrowers and lenders by appealing the court’s “wagyu and shiraz” ruling.
Appearing before a parliamentary committee yesterday, Australian Securities and Investments Commission chair James Shipton said the watchdog was concerned lending standards could slip.
Mr Shipton said ASIC’s move to appeal the decision would be a lesser disruption to borrowers, lenders and the economy than the potential effects of the ruling itself.
Last month, the court dismissed ASIC’s landmark case against Westpac that alleged the bank approved home loans without properly checking if applicants could repay them. Announcing the ruling, Justice Nye Perram said living expenses declared by customers on applications did not, in isolation, indicate whether borrowers could make their repayments.
“I may eat wagyu beef every day washed down with the finest shiraz but, if I really want my new home, I can make do on much more modest fare,” he said.
ASIC this week lodged a notice of appeal with the court. Yesterday, coalition MPs on the parliamentary joint committee on corporations and financial services argued the watchdog was creating more uncertainty.
Committee chair and Liberal Senator James Paterson, and Liberal MP Jason Falinski suggested ASIC’s appeal stoked concerns over credit availability and appeared to be based on insufficient evidence that consumers had been affected by Westpac’s former loan regime.
Senator Paterson said feedback from the financial industry indicated the court’s decision was well received and he was concerned with the appeal’s “policy implications”.
Anecdotal evidence of financial harm was “not very strong” to support the regulator’s action, he said.
Asked to provide specific evidence of harm to borrowers under Westpac’s previous loan regime, ASIC said the purpose of the appeal was not to focus on individual loans.
Rather, it was about the structural integrity of the lending system and potential harm to consumers if standards slipped.
Mr Shipton said ASIC believed there was a need to provide greater certainty, clarity and confidence to lenders.
“The interests of certainty … and therefore the broader economy … and therefore consumer protection would be best served (by this appeal),” he said.
“There would be a greater harm in not appealing as a result of the issues that we have and our senior counsel has.” Mr Shipton said the appeal was “forward-looking consumer protection”.
“We’re concerned that standards in responsible lending may very well drop,” he said. ASIC did not intend to make it harder for lenders, prevent borrowers from accessing money, or put the brakes on the economy, he said.
“We believe a fair and strong and efficient financial system is responsible lending …loans going to people who can afford to repay them,” Mr Shipton said.
Earlier in the day, Senator Paterson said consumers felt ASIC had “failed to protect them from bad practices”.
“We have a collective responsibility to restore trust in our institutions,”