"The problem for ASIC’s argument is that the mere fact that there are living expenses is not necessarily relevant to whether a consumer will be unable to comply with their loan obligations because it is always possible that some of the living expenses might be foregone by the consumer in order to meet the repayments," Justice Perram said. Loading Replay Replay video Play video Play video He gave the example of everyone needing to eat, but that different consumers spend different amounts on food depending on their financial circumstances. "I may eat wagyu beef everyday washed down with the finest shiraz but, if I really want my new home, I can make do on much more modest fare." Justice Perram said similar issues arose in assessing whether a loan would place someone into financial hardship.

"The fact that the consumer spends $100 per month on caviar throws no light on whether a given loan will put the consumer into circumstances of substantial hardship. "Nor for that matter does knowing that the consumer spends $500 per week on basic food items," he said. Extending that example, Justice Perram said that to determine hardship a lender would then need to know firstly that a loan repayment would force a borrower to cut their budget by a certain amount and in doing so would reduce expenditure on an item like food in a way that caused substantial hardship. Consumer rights groups said the ruling assumed people were able to tighten their belts when that was often not possible. "To suggest that borrowers ditch wagyu steaks and shiraz for cheaper food really is out of touch with the realities faced by most Australians," Financial Rights Legal Centre chief executive Karen Cox said.

The banking royal commission did not recommend any changes to responsible lending laws in its final report as the Westpac case was already before the courts. Loading However, Commissioner Hayne did say in his final report: “If the court processes were to reveal some deficiency in the law’s requirements to make reasonable inquiries about, and verify, the consumer’s financial situation, amending legislation to fill in that gap should be enacted as soon as reasonably practicable.” Consumer Action Law Centre chief executive Gerard Brody said responsible lending remained a live issue for consumer advocates. "It is clear from today’s decision that government will need to legislate to fill the gap," Mr Brody said. Groups like CALC are particularly concerned that the ruling will embolden unscrupulous lenders, such as payday lenders.

Westpac had originally tried to settle the case for $35 million but Justice Perram dismissed the settlement over concerns that ASIC had not properly made out its case and that the bank and the regulator had not agreed on how many loans were in breach of the laws. ASIC commissioner Sean Hughes said while the regulator would have like to have won the case it was helpful to have clarification from the court. "This case related to a historical set of circumstances. The economic situation and the market is different today and we’re currently consulting on new guidance in relation to the application to the responsible lending obligations," Mr Hughes said. ASIC is holding public hearings as part of its consultation. Mr Hughes said any legislation change was a matter for government. "It's not something that we think needs to happen at the moment, we would rather get on with clarifying the guidance."