ASIC Watch: Legacy Banking Systems Draw $26M Hardship Penalties

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This story features WESTPAC BANKING CORPORATION, and other companies.
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This story features regulatory enforcement affecting WESTPAC BANKING CORPORATION, NATIONAL AUSTRALIA BANK, Walker Stores (Snaffle), Eden Asset Management, Global Pacific Solutions and broader compliance risks across listed and unlisted financial providers.

The Federal Court's $26m penalty against Westpac Banking Corporation has turned what once looked like an operational and technology problem into a direct balance sheet issue. Together with penalties against other consumer credit providers and recent AFS licence cancellations, the message from ASIC and the courts is clear: legacy systems and weak compliance controls are no longer back-office irritants; they are financial liabilities.

• Westpac ordered to pay -$26m for failing to respond to more than 200 hardship requests between 2017 and 2023
• Walker Stores, trading as Snaffle, hit with a -$33.5m penalty after nearly $20m of interest overcharging across 38,000 contracts
• Eden Asset Management and Global Pacific Solutions had AFS licences cancelled after failing to meet basic compliance obligations
• National Australia Bank was previously penalised -$15.5m for similar hardship failures, with ANZ Group also facing proceedings
• ASIC is increasingly treating compliance architecture as a core consumer protection issue

By Valery Prihartono

Westpac: hardship systems become penalty risk

The Federal Court found a deficiency in Westpac’s ((WBC)) online hardship notice process meant 229 vulnerable customers received delayed responses –or no response at all– to requests for repayment relief on mortgages, personal loans and credit cards.

Under the National Credit Code, lenders must respond to hardship notices within 21 days. Many affected customers were dealing with serious illness, domestic violence, job losses or natural disasters. Instead of timely assistance, some faced debt on-selling to third-party collectors, adverse credit file listings and significant stress while waiting for responses that never came.

Justice Timothy McEvoy described Westpac’s conduct as “grossly negligent” and rejected the bank’s submission that a -$10m penalty was sufficient. The finding matters because it frames the failure as more than an isolated system glitch.

Westpac knew the legal obligation existed, yet its systems did not reliably capture and escalate hardship requests.

Westpac has completed a -$1.7m remediation program, including interest refunds, debt waivers and compensation for non-financial loss.

But the -$26m penalty far exceeds customer remediation, showing courts are prepared to impose substantial punishment beyond simply putting affected customers back in position.

A broader warning for lenders

For banking sector investors, Westpac establishes an important precedent. ASIC has made hardship and pricing compliance a priority, particularly where legacy platforms fail to automate legal safeguards.

National Australia Bank’s ((NAB)) earlier -$15.5m hardship penalty and proceedings against ANZ Bank ((ANZ)) underline this is a sector-wide issue rather than a single-bank problem.

The investment implication is straightforward: legacy systems now carry legal, remediation and reputational risk. Each year of non-compliance compounds the eventual exposure.

For major banks, penalties can be material. For smaller lenders, similar failures relative to scale could prove existential.

Snaffle: consumer overcharging punished heavily

On May 18, 2026, the Federal Court ordered a -$33.5m penalty against Walker Stores Pty Ltd, trading as Snaffle, for systematically overcharging financially vulnerable consumers under consumer credit contracts.

Snaffle applied interest to the total contract purchase price rather than the reducing unpaid balance on more than 38,000 contracts, resulting in almost $20m in overcharged interest.

Its instalment-payment contracts also carried effective annual cost rates of 88%-103%, well above the statutory 48% cap for consumer credit contracts.

The penalty, combined with the amount overcharged, highlights the court’s view that systematic overcharging of vulnerable consumers warrants punishment well beyond refunds.

Snaffle’s entry into liquidation before the penalty was handed down also raises the question of whether sufficient assets remain to satisfy the order.

Licence cancellations: compliance as a condition of survival

ASIC has cancelled the AFS licences of Eden Asset Management and Global Pacific Solutions, reinforcing that licence cancellation remains the regulator’s ultimate sanction for firms unable to meet basic obligations.

Eden’s cancellation followed failures relating to statutory reporting, audit and capital requirements. Global Pacific Solutions’ licence was cancelled after the firm ceased carrying on a financial services business.

The pattern is simple: compliance is not a one-off hurdle at licence issue; it is a continuing condition of operating.

For investors assessing fund managers, advisers or other licensees, late financial reporting, licence conditions, responsible officer changes and enforcement history should be treated as early warning signals.

Scam alert: WhatsApp, impersonation and fake crypto platforms

ASIC has warned of coordinated scams targeting retail investors through social media and private messaging apps.

The typical sequence begins with social media advertisements promising stock market tips or investment insights. Victims are then moved into private WhatsApp groups, where scammers impersonate well-known finance personalities, including Paul Clitheroe, before directing them to fake cryptocurrency trading platforms.

These platforms often display polished dashboards with fabricated trades, price charts and account profits. When victims attempt to withdraw funds, they are asked to pay additional “withdrawal fees” before accounts are frozen or deleted.

ASIC advises investors to verify virtual asset providers through the AUSTRAC Virtual Asset Service Provider Register.

Other defences include checking identities through official channels, avoiding investment advice delivered through private messaging apps and questioning any promise of unusually high or consistent returns.

Investment implications: compliance quality as differentiator

The Westpac, Snaffle and licence cancellation cases point to the same portfolio lesson: compliance quality is becoming a meaningful differentiator across financial services.

For banks and lenders, investors should assess whether hardship systems automatically capture requests, track the 21-day response deadline and escalate overdue matters. Manual processes increase the risk of missed obligations.

For consumer credit providers, investors should look for independent verification of interest calculations, regular monitoring of effective cost rates, clear audit trails and periodic testing of pricing accuracy.

For fund managers, advisers and other licensees, current licence status, timely audited reporting, complaint trends and remediation disclosure remain important indicators of operational health.

Conclusion: operational negligence now has a price

The May 2026 enforcement activity shows ASIC is increasingly willing to turn operational weakness into litigation risk.

Cost-of-living pressures have made hardship notices, credit pricing and licence discipline front-line consumer protection issues.

For investors, the implication is clear. Financial providers investing in modern core systems, automated compliance workflows and transparent remediation should deserve greater confidence than peers relying on patched legacy networks.

In an environment of active regulatory scrutiny, compliance architecture has become part of the investment case.

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