ASIC defends loans appeal

Regulator voices fears if Westpac decision stands

ASIC says it is appealing the Federal Court’s Westpac loans case decision in the name of the nation’s long-term economic confidence, and to prevent banks’ lending standards retreating after years of improvement.

The corporate regulator told a parliamentary committee yesterday its appeal of the decision by Justice Nye Perram was a lesser disruption to borrowers, lenders and the economy than the potential impacts of the ruling itself, despite committee chair James Paterson suggesting otherwise.

Rather, ASIC chairman James Shipton told the joint committee on corporations and financial services the appeal was “forward-looking consumer protection” and a salve for the lingering uncertainty around what constitutes responsible lending.

“There is the risk indeed that lenders will (now) say that whatever is in ASIC’S guidance ... and whatever is said in the (credit) act ... they’ll act anyway,” Mr Shipton (pictured) said. “We’re concerned that standards in responsible lending may very well drop.”

The hearing follows the Federal Court’s dismissal of ASIC’S landmark case against Westpac in August, which alleged the bank approved mortgages without properly checking applicants’ credit.

Justice Perram dismissed the test case, saying living expenses declared by customers on applications did not on their own show capacity to meet repayments under a loan.

“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,” Justice Perram said.

Mr Shipton said ASIC had come to the conclusion, supported by advice from its senior counsel, there was a need to provide greater certainty, clarity and confidence to lenders to lend responsibly.

“The interests of certainty ... and therefore the broader economy ... and therefore consumer protection would be best served (by this appeal),” Mr Shipton said. “There would be a greater harm in not appealing, as a result of the issues that we have and our senior counsel has.”

Committee chair Mr Paterson, however, said the feedback he had gathered from the financial industry indicated the Federal Court’s decision had been well received.

Senator Paterson said he was concerned with the “policy implications” of ASIC’S appeal, and added that anecdotal evidence of financial harm was “not very strong evidence” to support the regulator’s action.