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ASIC sues major bank

The financial services regulator has commenced proceedings in the Federal Court against a big four bank over allegations it charged fees for making certain periodic payments when it was not entitled to.

National Australia Bank Ltd (NAB) is being sued by the Australian Securities & Investments Commission (ASIC) over allegations that it charged fees for making certain periodic payments between 25 February 2015 and 22 February 2019, when it was not contractually entitled to do so. 

According to ASIC, this may have been done on at least 195,305 occasions, totalling $365,454.

These fees were alleged to have been charged to 4,874 personal banking customers and 913 business banking customers.

NAB’s standard terms stated that NAB would charge $1.80 for periodic payments to other accounts within NAB and $5.30 for periodic payments to accounts at another bank. Its terms also stated that customers would be entitled to exemptions from periodic payment fees for certain transactions, such as payments to NAB home loans, NAB personal loans, certain NAB savings accounts and certain NAB service packages.

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Periodic payment fee arrangements could be established by customers completing paperwork in a NAB branch.

Bank staff were required to manually enter details of the periodic payment into NAB’s system when setting up the payment, which if entered incorrectly, could result in customers being wrongly charged fees, ASIC said.

From at least 20 July 2007, NAB charged some customers a periodic payment fee of:

  • $1.80 or $5.30 when they were entitled to an exemption under NAB’s standard terms; or
  • $5.30 when the correct fee was $1.80.

However, ASIC alleges that it inappropriately charged fees between 25 February 2015 and 22 February 2019, when it was not contractually entitled to do so. 

ASIC alleges that by charging the fees, or by notifying customers of the charging of each fee via a bank statement, NAB:

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  • made false or misleading representations that it was contractually entitled to charge the fees when it was not;
  • engaged in misleading or deceptive conduct; and
  • contravened its obligation as an Australian financial services licensee to comply with financial services laws.

ASIC noted that while NAB had identified that it was charging periodic payment fees in error to both personal and business banking customers by the end of October 2016, it “took NAB until July 2018 to lodge a breach report with ASIC and notify customers of the overcharging, and to begin remediating customers”.

ASIC alleges that between at least January 2017 and July 2018, NAB continued to charge customers periodic payment fees even though it knew overcharging was occurring and did not have systems to prevent those fees from being charged incorrectly.

“NAB did not change its systems to prevent overcharging until 22 February 2019, when it ceased to charge those fees to customers,” ASIC said in a statement.

It alleges that, between January 2017 and July 2018, NAB therefore engaged in “unconscionable conduct” and contravened its obligations as an Australian financial services licensee to ensure that financial services covered by its licence were provided efficiently, honestly and fairly by:

  • continuing to charge periodic payment fees to customers in circumstances where it knew that it had no contractual entitlement to do so; and
  • failing to inform customers about the wrongful charging of fees, or suggest that customers review the periodic payment fees charged to their accounts.

ASIC also alleges that between 25 February 2015 and 22 February 2019, NAB failed to provide financial services efficiently, honestly and fairly by:

  • imposing periodic payment fees on customers when it had no contractual entitlement to do so; and
  • failing to have adequate systems and processes to:
    • ensure that periodic payment fee overcharging did not occur;
    • detect periodic payment fee overcharging when it did occur; and
    • identify and remediate affected customers.

The proceeding will be listed for a case management hearing on a date to be determined by the court.

A NAB spokesperson commented: “NAB acknowledges that it charged some customers incorrectly for periodical payment fees because staff members selected an incorrect fee when setting up a payment arrangement for a customer.

“Where we get it wrong, we make our best endeavours to remediate current and former customers. NAB is conducting a remediation program with the aim of refunding periodical payment fees (with interest) that were charged incorrectly in the period from 1 August 2001.”

It added that, to date, the bank has made remediation payments to customers totalling more than $8 million. Customer remediation activities are now overseen by NAB’s Centre for Customer Remediation, which is focused on ensuring that where remediation is required, it is provided “quickly, fairly and consistently”.

[Related: Major bank to pay $10m for unconscionable conduct]

ASIC sues major bank
ASIC sues major bank
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Annie Kane

Annie Kane is the editor of The Adviser and Mortgage Business.

As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts. 

Contact Annie at: This email address is being protected from spambots. You need JavaScript enabled to view it.

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