Westpac puts buy now, pay later lenders on its list of ‘sensitive’ sectors
Catherine McGrath, chief executive of Westpac, said the bank had set emissions reduction targets for 2030.
Westpac is lifting the limit on its interest-free loans for homeowners to make their homes more energy efficient by $10,000 to $40,000.
At the same time, the bank added buy now, pay later, lend to the list of “sensitive” sectors it will be cautious about with the bank.
These measures are part of a series of social and climate policies announced by Westpac chief executive Catherine McGrath.
Since late 2020, Westpac has refused to bank payday lenders, but it has now released a list of sensitive sectors putting Buy Now, Pay Later (BNPL) lenders alongside lower tier lenders, finance companies. oil and gas extraction and loggers.
* More cases are emerging of banks using profits from the sale of customers’ homes to pay off other mortgages
* ANZ reports profit of nearly $2 billion despite effects of Covid-19
* BNZ’s six-month profit jumps 80%, tracks big results from other big banks
These are areas that Westpac says it is ready to fund, but needs work to improve ethical business practices.
Companies in the sectors would face more scrutiny to be allowed to do business with Westpac and could be debanked if they fail to comply with regulations affecting them.
BNPL is a form of interest-free short-term lending which the Minister for Commerce and Consumer Affairs, David Clark, is considering regulating following revelations that vulnerable borrowers can take out multiple BNPL loans without having to submit to checks of financial capacity.
Buy now, pay later (BNPL) loans have become a habit, according to a government survey. Many people are caught in a consumption cycle fueled by BNPL. He has another dark side. Some people buy basic necessities like meat and medicine on BNPL.
Earlier this month there was public outcry after it emerged people could use BNPL loans to buy alcohol.
McGrath said Westpac’s list of sensitive sectors was released to show customers what the bank was worried about and watching for.
She said buy now, pay later was a form of debt, but many buyers tended not to see it that way.
“What I think is extremely important is that whenever someone borrows, it’s both well assessed and regulated,” she said.
Westpac also released a list of sectors it would not lend to, including payday lenders, mobile merchants and mining companies.
Also on Westpac’s Prohibited List were businesses involved in commercial whaling, shark finning, and businesses involved in nuclear weapons, except under government-controlled programs with countries in the United States. NATO authorized under the Nuclear Non-Proliferation Treaty.
The bank has also committed to aligning its operations with a net-zero future by joining the United Nations Net-Zero Banking Alliance.
McGrath said Westpac has committed to a net-zero loan portfolio by 2050.
The bank had waited until it had solid plans in place to work with specific sectors before committing, she said.
“Very concrete actions are already starting to be underway,” she said.
The bank had already loaned more than $30 million interest-free through its Warm Up Loans and was aiming to reach $100 million, she said.
Loans could be used to finance insulation, installation of heat pumps, double glazing, ventilation, efficient wood burners, solar power and batteries, but had now been extended to include installation of EV chargers.
The bank is also piloting a sustainable finance loan for farmers.
These would require borrowers to meet all parts of the Sustainable Agriculture Finance Initiative guidelines, which include environmental, emissions and labor standards.
The farm loan was being piloted with a small group of farmers, McGrath said. Borrowers would be rewarded with lower cost loans if they met their targets within two years.
The loans would be rolled out more widely next year, McGrath said.
The increase in the Warm Up loan limit would take effect on August 4.
McGrath said the bank’s next goal would be to work closely with large corporate clients who wanted to access loans, to establish how they were managing climate-related risks and what they were doing to decarbonise.