ASIC's decision to settle the responsible lending civil court action brought against Westpac has drawn a mixed reaction from consumers and banking experts. Westpac yesterday admitted to breaking the responsible lending provisions of the national credit act on at least 10,500 loans made between 2011 and 2015. The bank will cough up A$35 million - a record penalty for a credit breach in Australia - under a settlement agreement that has been submitted to the Federal Court for approval. While the bank maintains that none of the loans were unsuitable for customers at the time of their origination, Westpac has admitted its lending assessments did not have regard to applicants' declared living expenses. The bank has also admitted its loan repayment estimates given to thousands of interest-only borrowers were misleading because they understated the monthly repayments required after the expiry of interest-only periods. ASIC chair James Shipton said the settlement outcome was a warning to lenders that they must comply with their statutory lending obligations. "This outcome, and ASIC's actions in relation to responsible lending, reinforce that all lenders must obtain information from individual borrowers about their financial situation to ensure they can properly assess the ability of the customer to repay the loan," he said. "Lenders must then verify the information to ensure that it is true, and then assess whether the loan is unsuitable for the borrower. "If they do not, ASIC will take action to enforce the law." While Shipton was declaring victory one of the country's top banking academics - Dr Patrick McConnell from Macquarie University - said ASIC's tendency to settle, rather than follow through on court action it initiates, highlighted the regulator's defensive posture. "The way ASIC is structured means it is always on the back foot," he said. "In most cases ASIC has enough evidence to prosecute but the banks have the upper hand because they can tap shareholders' money to draw legal cases out and eventually come to a settlement." McConnell believes that ASIC has become part of the structural problem in the banking industry and wants the federal government to conduct a review of how regulation of the financial services sector is carved up between the different agencies. "The regulatory framework is broken," he said. "ASIC is not only a banking regulator - it has many other areas of responsibility that means it is dragged in too many directions and then loses its focus." The public response yesterday on social media to news of the legal settlement mostly supported McConnell's arguments. Several Twitter posts observed that Westpac stood to gain more than $35 million on the thousands of interest-only loans in which it misled borrowers. Others questioned whether the settlement outcome would act as a deterrent in the sector. "How does someone breaking the law get to agree to the penalty imposed?" asked one Twitter member. While borrowers vented on social media,