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The case of St George customer Fiona Vinall’s legal crusade against her bank is quickly rising to the level of a fable. The dispute, in which the small borrower took on the corporate might of St George bank’s parent, Westpac, in the NSW Supreme Court, was a win for common sense over the bank’s procedural absurdity.
But while Vinall bravely slayed the St George dragon, the fact that she had to do so has left the bank’s commitment to care for its customers looking murky.
So bizarre was the bank’s behaviour in response to Vinall’s mistaken $44 underpayment on one month’s interest on her mortgage that Supreme Court judge David Hammerschlag branded the bank’s conduct as “legally unjustifiable and short on commercial morality”.
The conduct was even shorter on common sense. This was a $44 problem that will have cost Westpac tens of thousands of dollars in legal fees and an even higher toll in public relations.
As this case progressed from a minor skirmish to a cause celebre, Westpac reached the point where it was attempting “to defend the indefensible”, according to the judge, who appeared nonplussed about the case’s progress through the courts and the vigour with which Westpac was pushing its position.
Sure, the customer may have made a small, understandable error, but it was the bank’s blunderous response full of calamitous box-ticking and bureaucratic decision-making that turned the snafu into a disaster.
This tale begins with Vinall’s $284,192 loan from St George – the interest payment for which was reduced last July following the Reserve Bank rate cut. A letter from the bank to Vinall said her interest payment would fall after July 10, 2025. She duly reduced her payment on July 12 in line with the rate cut.
But the reduced payment didn’t come into effect until the following month, which inadvertently left this customer about $44 in arrears. When she became aware of her mistake shortly after, she rectified the situation and paid the additional amount.
She also alleged that the notification letter from the bank was misleading.
This is where the story should have ended. Instead, the bank reported the underpayment as an event of “arrears” with credit reporting agency Equifax Australia. This resulted in Vinall’s credit history preventing her from borrowing to buy a new house, she said.
The shortfall in one month’s payment resulted in a procedural notification to the credit agency the bank said it was obligated to make.
Had someone inside the bank with seniority been apprised of Vinall’s understandable mistake and its rectification, surely the matter could have been dealt with rather than having the customer take it to court.
After all, the shortfall was equivalent to 0.0155 per cent of the outstanding mortgage, Hammerschlag noted. Relative to Westpac’s $140 billion market capitalisation, the amount is too small to calculate.
Ultimately, Westpac fought the case armed with barristers and “an affidavit from a bank officer seeking to defend the indefensible, namely maintaining that the credit record was (and presumably remained) an accurate reflection of what had happened ie that there had been an adverse credit event by the $44.11 payment shortfall,” Hammerschlag’s judgment read.
But it was only after the judge took the unusual step of escalating by asking for Westpac’s chief executive, Anthony Miller, to come to court that the bank capitulated and took steps to remove the offending black mark from the credit register.
The situation that led to this bank snafu may be familiar to many borrowers – and as such the publicity around this case could easily open a can of worms and lead to the bank needing to reset its communications with customers. It will certainly garner more attention for how Westpac handles Vinall’s claim for damages against it stemming from the failed house purchase.
The judge described the bank’s communication around the changes to interest payments “at best ambiguous and at worst likely to mislead”.
It makes you wonder how many other customers have made similar mistakes, suffered the same consequences and without redress.
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