The corporate regulator has appealed against a judge’s ruling that Westpac did not engage in irresponsible lending, in part because home loan customers could trim their spending by cutting out meals of wagyu beef and fine shiraz.
Consumer groups last month blasted the decision, made by the federal court judge Nye Perram, as out of touch with the community.
It has also played into an ongoing debate over whether the courts have made it too hard for regulators to prove companies breached the law by doing things that damaged the interests of their customers.
In a notice of appeal filed with the court, the Australian Securities and Investments Commission said Perram was wrong when he said Westpac took the living expenses of loan applicants into account by using a rule where more scrutiny was applied when customers declared their expenses were more than 70% of their income.
Perram was also wrong to accept Westpac’s characterisation of interest-only loans, Asic told the court.
“Asic considers that the federal court’s decision creates uncertainty as to what is required for a lender to comply with its assessment obligation, nor does Asic regard the decision as consistent with the legislative intention of the responsible lending regime,” the Asic commissioner Sean Hughes said. “For those reasons, Asic will appeal to the full court of the federal court.”
In his judgment, Perram said knowing how much a customer spent on food did not tell the bank the minimum amount the client had to spend on food. “I may eat wagyu beef everyday 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.
“Knowing the amount I actually expend on food tells one nothing about what that conceptual minimum is. But it is that conceptual minimum which drives the question of whether I can afford to make the repayments on the loan.”
Separately, following a series of court decisions that have taken a narrow view of what constitutes unconscionable conduct against consumers, the competition regulator Rod Sims has called for a new law banning unfair conduct across the economy.
