Queensland couple Michelle and Ian Tate dreamed of paving the way to their financial future with investment properties.
They bought their first property with a Westpac loan in 2008 before stepping out of the market to have three children.
In 2013, they decided it was time to get back in.
They went back to the bank as a family of five on a single income and took out a loan for a second property in Darwin, followed by more loans for two additional properties a year later.
Ms Tate says their plans fell apart under the weight of fees and family expenses.
But it wasn't until they sold their family home they finally realised they couldn't repay the $1.8 million they had borrowed from Westpac over eight years.
They have now sold all but one property, a block of land in Darwin.
"It is devastating, we've lost everything," Ms Tate told reporters on Thursday.
Asked if she had ever felt she should turn away a loan offer, she said no, because loan brokers had made borrowing seem so easy.
She blames Westpac for trusting the information the broker provided them about her family's financial position, saying the bank did not independently verify the situation.
"There was no expenditure looked into, it was just 'Yes, you can borrow this amount of money' and that was how simple it was," she said.
Law firm Maurice Blackburn believes there are thousands more just like the Tates, who are now leading plaintiffs in a class action against Westpac.
The Federal Court action filed on Thursday applies to loans issued from January 1, 2011, and alleges the bank approved home loans to people who could not afford to pay them back.
It is the first case against one of the big four banks since a royal commission delivered damning findings about the conduct of Australia's financial institutions.
Principal lawyer Ben Slade says the obligation is on the banks and that under law, customers like the Tates should be financially compensated.
They are seeking a repayment of about $400,000.
They will argue Westpac failed in a number of ways to properly check if home loan customers would be able to meet repayments.
Allegations include that the bank wrongly assessed the ability of borrowers to repay loans using a tool called the Household Expenditure Measure (HEM).
HEM is a benchmark that estimates someone's household expenses, but is not a true reflection of someone's actual situation.
It will also be alleged that Westpac failed to properly assess if customers would cope after interest-only periods on their loans ended.
Westpac says it will defend the claims against it.
Australian Associated Press
