A federal court in Australia has dismissed a case filed by the corporate regulator against banking major Westpac on responsible lending laws.

In the lawsuit, the Australian Securities and Investments Commission (ASIC) alleged that the lender approved home loans without adequate credit checks.

Dismissing the case, the court said that Westpac complied with existing laws by using an automated system to estimate expenses.

According to ASIC, Westpac used an automated Household Expenditure Measure benchmark for consumer expenses. The benchmark, according to the regulator, did not have regard to the actual expenses provided by the consumer, breaching its obligations.

Furthermore, ASIC stated that the Westpac did not consider the requirements of higher repayments at the end of the interest-only period.

However, in his decision, Federal Justice Nye Perram said that the Australian lender took consumers’ declared living expenses to income into account, as a measure of stability.

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In a statement, Westpac acknowledged the court decision reiterating its commitment to lend responsibly to customers.

Westpac consumer division chief executive David Lindberg said: “Westpac has always sought to lend responsibly to customers and takes its lending obligations very seriously.

“This is an important test case for the industry, and we welcome the clarity that today’s decision provides for the interpretation of responsible lending obligations.”

The decision comes when the Australia is working to step up surveillance on banks following widespread wrongdoing found by a public inquiry last year.

Recently, Westpac agreed to refund around 93,000 overcharged customers in New Zealand.