Federal Court fines Westpac A$26 million for failing to respond to customer hardship requests

The Federal Court of Australia on October 11, 2026 ordered Westpac Banking Corporation to pay a A$26 million pecuniary penalty after finding the bank repeatedly failed to respond to customers who had lodged online hardship notices. The civil penalty stems from a long running Australian Securities and Investments Commission prosecution that identified systemic delays and process failures affecting vulnerable retail customers.

What the court found

The court concluded Westpac contravened provisions of the National Credit Code and related consumer protection obligations by failing to respond to hundreds of hardship requests within the timeframes required by law. The contraventions cover an extended period, and the regulator identified both operational shortcomings and deficiencies in Westpac's handling of customers seeking relief because of unemployment, illness, caring responsibilities or other serious personal hardships.

ASIC said the failures were identified across a number of Westpac brands and business units. As part of the proceedings the parties and the court examined the bank's record-keeping and remediation steps, including payments Westpac has already made to some affected customers.

Regulatory context and penalties trend

The A$26 million order is the latest in a string of major enforcement actions by ASIC and the Federal Court against Australia’s financial institutions in recent years. Regulators have increasingly used civil penalties and court proceedings to hold banks accountable for consumer protection breaches, including failures in responsible lending, fee disclosures and dispute handling.

ASIC said the penalty level reflects the seriousness and breadth of the conduct, the need for general deterrence across the banking sector, and the fact Westpac had undertaken remediation work and cooperated with the regulator during the investigation. Industry observers say the decision underscores that regulatory tolerance for lapses in hardship handling is low and that lenders must prioritise timely and effective responses for customers in financial distress.

Practical impact for customers and banks

For customers, the ruling highlights an avenue for redress when legally required processes are not followed. Consumers who submit hardship notices are entitled under the National Credit Code to a prompt and substantive response, and the court’s finding reinforces those statutory protections.

For banks, the decision sends a clear operational message. Firms will need to ensure systems for receiving, tracking and responding to hardship notices are robust, that staff are trained to recognise and prioritise vulnerable customers, and that oversight mechanisms can detect and correct backlogs and record-keeping gaps before they become systemic. Compliance functions and boards can expect greater scrutiny of hardship frameworks in regulatory reviews and examinations.

Industry reaction and wider implications

The penalty arrives amid heightened public and policy focus on living costs and household financial stress. Consumer advocates have long argued that lenders must act quickly and fairly when borrowers seek temporary relief. Regulators have signalled that failure to meet those obligations will attract enforcement action.

Beyond immediate remediation for affected customers, the ruling may influence how banks design digital channels and automated systems for intake of hardship requests. Financial institutions increasingly rely on online forms and third party platforms to manage customer communications. The case emphasises the need to build end-to-end processes that ensure electronic submissions trigger timely, human-reviewed responses when required by law.

What happens next

The court ordered the penalty to be paid to the Commonwealth under the Federal Court judgment. The decision also forms part of a broader body of recent enforcement outcomes that ASIC cites when setting supervisory priorities and when seeking deterrent remedies against misconduct in financial services.

Westpac will continue to be monitored by regulators and stakeholders for the implementation of compliance improvements and for any further remediation commitments. The ruling will likely feed into ongoing discussions between the industry, supervisors and consumer groups on how to strengthen protections for customers facing financial hardship.

As Australian households face persistent cost pressures, the ruling is a reminder to lenders that legal obligations to vulnerable customers are not optional, and that the reputational and financial costs of non-compliance can be material.