Westpac Hit With $26M Penalty for Hardship Failures

A Federal Court ruling confirms Westpac left hundreds of struggling borrowers without a response — here's what you need to know about your hardship rights.

A Federal Court judgment this week has delivered one of the most significant hardship penalties ever imposed on an Australian lender, with Westpac ordered to pay $26 million after repeatedly failing to properly handle hardship requests from borrowers over a six-year period.

The case was brought by the Australian Securities and Investments Commission (ASIC), and [The Adviser](https://www.theadviser.com.au/lender/48483-judge-blasts-westpac-as-hefty-hardship-penalty-handed-down) reports that the Federal Court found Westpac — along with its subsidiaries St.George, BankSA and Bank of Melbourne — left more than 200 customers without a decision on their hardship requests beyond the 21-day deadline set out in the National Credit Code. In some instances, borrowers received no response at all. The conduct spanned from 2017 to 2023.

Affected customers held products ranging from home loans to credit cards, personal loans and car finance. They had contacted the bank saying they were struggling with repayments due to circumstances including domestic abuse, natural disasters, serious illness and job loss.

How a $26 Million Penalty Came About

Justice McEvoy acknowledged the failures were not deliberate, describing them as stemming from "inadequate systems and operational failures." His assessment was nonetheless unsparing: "While the contraventions were not suggested to be deliberate and arose instead from inadequate systems and operational failures, I have accepted that they were grossly negligent."

The judge highlighted the compounding harm that flowed from the initial failure to respond. In a number of cases, borrowers had adverse credit information recorded on their credit files, and their debts were sold to third-party debt purchasers who then actively pursued those debts. "These circumstances add an additional layer of harm, and significance, to Westpac's conduct," Justice McEvoy said.

Westpac had argued that a $10 million penalty would be appropriate given the breaches were unintentional. Justice McEvoy rejected that figure as "little more than derisory in the circumstances and therefore wholly inappropriate," and imposed the $26 million penalty instead. Westpac has also paid more than $1.7 million in remediation to affected customers, covering refunds of fees and interest as well as compensation for non-financial loss.

ASIC deputy chair Sarah Court said the outcome should serve as a warning to all lenders. "Westpac failed the very customers who needed help when they needed it most. These were customers who were asking for some breathing room for a range of reasons including domestic abuse, natural disasters, serious illness or the loss of their job. Instead of providing a safety net for these customers, Westpac's systemic failures let them slip through the cracks."

The Westpac judgment is part of a broader pattern of escalating hardship enforcement. The Adviser notes that National Australia Bank and its subsidiary AFSH Nominees were hit with a combined $15.5 million penalty in 2025 for failing to respond to hardship notices within the required timeframe. ANZ faced a $40 million sanction for not properly handling hundreds of hardship requests. Non-bank lender Resimac has also been sanctioned over its handling of hardship applications.

Your Hardship Rights as a Borrower

The National Credit Code gives every Australian borrower the legal right to request financial hardship assistance from their lender. This applies to home loans, personal loans, car loans and credit cards — you don't need to be in default to invoke it. You simply need to be experiencing genuine financial difficulty.

Here is how the process is meant to work:

- You notify your lender in writing that you're experiencing financial hardship and ask for a variation to your loan terms. - Your lender must respond within 21 days. - If the lender declines, it must explain its reasons in writing and direct you to the Australian Financial Complaints Authority (AFCA) if you wish to escalate.

Hardship variations can include reduced repayments for a set period, a temporary pause on repayments, or an extension of the loan term to bring monthly payments down. These aren't favours — they are legally required considerations.

What to Do If You're Struggling Right Now

If repayments are becoming unmanageable, here is my practical advice:

**Lodge a formal hardship notice in writing.** Email works. Keep a copy, record the date, and follow up if you don't receive a response within three weeks.

**Know your escalation pathway.** If your lender doesn't respond within 21 days, or declines your request without a written explanation, you can take the matter to AFCA at no cost. That is exactly the pathway the law provides.

**Review whether your current loan still suits you.** Sometimes a hardship situation is a signal that your loan product is no longer appropriate. It may be worth exploring whether [refinancing your home loan](/home-loans/refinance) to a more competitive rate or more flexible structure could ease the pressure. The [refinance savings calculator](/calculators/refinance-savings) will show you what switching could save each month, and the [borrowing power calculator](/calculators/borrowing-power) can help you understand your options before circumstances change further.

**Act early on arrears.** The harm in the Westpac case was compounded because ignored hardship requests led to credit file damage and debt collection action. Early intervention protects you from that outcome.

Courts are holding lenders to account for hardship failures at a level not seen before. If you're unsure about your options, a mortgage broker can help you assess whether your current lender is serving you well — or whether it's time to explore [cheaper home loan options](/home-loans/cheapest).