Lenders can do what they want when assessing loan applications, says the judge who argues borrowers can replace Wagyu beef and shiraz with modest fare to meet their repayments.
Consumer groups want the federal government to address gaps in responsible lending laws after the Federal Court dismissed the financial regulator's test case against Westpac.
Justice Nye Perram did not accept lenders must use consumers' declared living expenses to answer key questions about whether someone can meet their repayments or if they would face substantial hardship.
"A credit provider may do what it wants in the assessment process, so far as I can see; what it cannot do is make unsuitable loans," he said on Tuesday.
Justice Perram said the declared living expenses do not demonstrate a consumer's capacity to meet their repayments, as they may choose to forgo expenses like gym memberships.
"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.
The fact a consumer takes an annual first class holiday to the US is not relevant to assessing whether the repayments will put them into circumstances of substantial hardship, he said.
"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."
Justice Perram said knowledge of a consumer's declared living expenses may show they will have to trim their sails if the loan proceeds.
He rejected ASIC's allegation that Westpac breached its responsible lending obligations in the way it assessed 262,000 home loans using an automated decision system between December 2011 and March 2015.
Justice Perram - who rejected an agreed record $35 million fine to settle the case last year - said the national credit act was silent on how a lender answers whether a consumer can meet their repayments or could only comply with substantial hardship.
Financial Rights Legal Centre CEO Karen Cox said the decision suggests banks do not have to have regard to people's actual expenses when they lend, which she argued will allow lenders to continue to extend unsustainable loans that set people up to fail.
Consumer groups want the responsible lending laws amended to ensure lenders make reasonable inquiries and verify borrowers' actual financial situations.
ASIC is updating its responsible lending guidance to clarify what it expects of lenders.