It is also contributing $1 million over four years towards financial literacy and financial counselling initiatives. It is understood the bank will contact about 5000 customers over the issue. It has 2.8 million credit card customers in total. A Westpac spokesman explained ASIC's concerns over credit limit increases by saying that in some cases, the bank had relied on analysing customers' expenditure and repayments, rather than directly enquiring about their income and employment. "We believe this only occurred in a relatively small number of instances. We will be contacting those customers to review their situation," he said. "Where an increase in credit limit has caused a customer a financial issue, Westpac will put the customer right, through our financial hardship provisions, including providing a refund." He said the bank had made changes to its processes to make sure the issue did not occur again. ASIC's senior executive leader of deposit takers, credit and insurers, Michael Saadat, said the watchdog was focused on making sure banks complied with responsible lending laws. In 2014 it launched a review into how banks were inviting customers to increase their credit limits – and that review triggered the concerns about Westpac's processes. "Credit card issuers, like all consumer credit providers, have to meet obligations under responsible lending laws," Mr Sadaat said. ASIC said Westpac had been co-operative, and customers with concerns should contact the bank. Australians have slightly more than $50 billion in outstanding credit card debt, which remains a lucrative segment for banks but some of the lending standards have come under criticism in recent months. A report from the Senate's economics references committee last month said it encountered "deeply concerning" evidence that some consumers had been extended credit card debt they had no prospect of repaying in the short to medium term. It called for tougher responsible lending laws, saying banks should be made to assess a borrowers' capacity to repay funds over a "reasonable" period, which could be about three years. Alongside credit cards, ASIC has also in recent years turned its attention to the credit checks that banks carry out on home loan customers, last year reporting widespread flaws in the booming interest-only mortgage market. These included the failure of several banks to properly assess customers' living expenses, and wrong calculations about what customers' repayments would be. Clancy Yeates is a business reporter.
Westpac has agreed to pay out AUD 1m ($690,000) following concerns expressed by Australia's financial regulator, the Australian Securities and Investments Commission (ASIC), that the bank may not have followed sensible lending rules when it used automated processes to assess applications for credit card limit increases. In addition to the AUD 1m ($690,000) paid by the bank, which will be spent over four years to improve financial literacy, the bank has also agreed to change its processes and has launched a review program that might result in compensation being paid to those in financial difficulties due the bank's behaviour.