ASIC has announced that Westpac will provide 13,000 owner-occupiers who have interest-only home loans with an interest refund, an interest rate discount, or both. The refunds amount to $11 million for 9,400 of those customers.
The remediation follows an error in Westpac’s systems which meant that some interest-only home loans between 1993 and August 2016 were not automatically switched to principal and interest repayments at the end of the contracted interest-only period.
As a result, affected customers did not start paying any principal on their loans at the time agreed with the bank, and now have less time to repay the principal amount of their loans. These customers would also have paid more in interest.
To remediate the affected customers, Westpac will now:
- Refund the additional interest paid from when the loan was contracted to convert to principal and interest repayments; and
- Discount the interest rate for the remaining term of the loan.
The remediation has been designed so that customers pay no more interest over the life of the loan than they would have if the system error had not occurred.