Australian lender Westpac has admitted violating lending obligations while approving home loans from December 2011 to March 2015.
The firm also agreed to pay a civil penalty of A$35m ($25.11m) under the National Consumer Credit Protection Act 2009.
The overall settlement is subject to federal court approval.
In the stated period, Westpac approved around 260,000 home loans, of which 50,000 were approved without consumers’ actual expense information.
The Australian Securities and Investments Commission (ASIC) in a statement said that for 50,000 home loans Westpac utilised a wrong method to determine the consumer’s capacity to repay the loan at the end of the interest-only period.
It said that Westpac’s automated decisioning process should not have approved 10,500 loans out of these 100,000 loans.
ASIC started investigation into the violations in March 2017, however, it did not report any loss or damage caused on the part of consumers for the violations.
ASIC chair James Shipton said: “This is a very positive outcome and sends a strong regulatory message to industry that non-compliance with the responsible lending obligations will not be tolerated.
“Responsible lending in the home lending market is absolutely vital to consumers, banks and our economy.”
In a statement, Westpac said it changed its systems in 2015 to avoid such circumstances in future.
Westpac consumer bank chief executive George Frazis said: “Westpac takes its responsible lending obligations very seriously and this action does not relate to our current lending practices.
“We upgraded our credit assessment in 2015 and continue to thoroughly assess home loan applications.”