The Commerce Commission has filed High Court proceedings against Westpac today after it allegedly failed to provide credit card customers with all the information required by law.
If damages are awarded, a Commission spokesperson said the costs of borrowing and statutory damages for Westpac would likely be several million dollars.
Cost of borrowing includes interest, credit fees and default fees that lenders cannot enforce if it fails to meet initial disclosure requirements.
The Commission alleged Westpac breached the Credit Contracts and Consumer Finance Act 2003 and is seeking a declaration that Westpac breached its initial disclosure obligations under that law.
Initial disclosure information helps lenders understand their loan by providing details such as dispute resolution provider, hardship rights and how to cancel the loan.
The Commission is also seeking an order for the return of costs of borrowing to affected borrowers and an order for payment of statutory damages to affected borrowers.
“The Court may not necessarily order the maximum amount payable. For example, Westpac is able to apply to the Court to reduce the amount of statutory damages,” the Commission spokesperson said.
“If the Court agrees that Westpac is liable for the disclosure breach described by the Commission, then it will be asked to determine how the statutory remedies should be applied and the amount that ultimately may be payable to affected borrowers.”
Commission Chair Anna Rawlings said: “This case is important for clarifying the scope of lender liability to borrowers in a situation where thousands of customers were not provided with initial disclosure required under the law.”
Westpac reported to the Commission on March 2018 that it did not provide initial disclosure information to over 19,000 new credit card customers between May 2017 and March 2018.
Due to a process error, the Commission alleged some customers also did not receive disclosure of the terms of credit when they received their cards in the post.
A Westpac spokesperson said the disclosure documents were not sent to 19,365 new credit card customers as "a result of an error that occurred during an upgrade to IT systems”.
“Corrective disclosure was provided to these customers, and we proactively notified the Commerce Commission.
“We also refunded fees and interest charges to customers who were in default, and have made changes to make sure this issue is not repeated,” the spokesperson said.
Both parties said they would not comment further as the matter is before the Court.