To continue reading the rest of this article, please log in.
Create free account to get unlimited news articles and more!
Appearing before the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry on Thursday (24 May), Commonwealth Bank (CBA) general manager of retail Clive van Horen was questioned over the bank’s response to a technical error that overcharged simple business overdraft (SBO) and business overdraft (BOD) customers.
The commission heard that in some cases, customers paid more than double the interest required on their overdraft facility, with one customer charged 32 per cent for an overdraft facility with an interest rate of 16 per cent.
The customer reported the issue to CBA on 25 June 2015. However, the bank failed to address the issue until July 2016, after the customer filed a complaint with the Financial Ombudsman Service (FOS).
Commissioner Ken Hayne asked Mr van Horen: “At the moment, it seems to me that in 2013, CBA knew that at least some SBO customers were being charged double interest, or more than double interest, is that right?”
Mr van Horen responded: “That’s right.”
Commissioner Hayne continued: “Well, that problem’s stated in one sentence. The solution surely is to check whether every SBO is being charged the right interest?”
Mr van Horen replied: “Yes.”
The commissioner put it to Mr van Horen that the issue was not as complex as the CBA executive suggested.
Commissioner Hayne continued: “No doubt, coders, programmers, any other people have got to do a lot of things behind the scenes. Is the problem more complex or is the solution more complex than I have described?”
The CBA executive replied: “I think that’s a fair summary, Commissioner.”
Commissioner Hayne added: “Let’s hear no more about how technical it is, Mr van Horen. It seems to me to be a nasty, difficult, small problem that may require quite a deal of work to solve it, but the problem apparent to the bank in 2013 was that SBO customers have been charged double.”
Mr van Horen said: “Yes.”
Mr van Horen told the commission that CBA identified 2,500 SBO customers and 300 BOD customers were affected by the error.
When asked how CBA responded to the error, Mr van Horen said: “What we did about it in 2013 was put in place a manual process while we were developing the system-based fix, which then happened in May 2015.
“That was a manual process which did run intermittently or we can’t confirm going back to find records that it was run every month, but it was a monthly manual process to identify the known cases.
“Our failing was that it was not comprehensive, and it missed a very substantial part of the cases that we subsequently found.”
The third round of hearings began on Monday (21 May) and focuses on loans to small and medium-sized enterprises, with responsible lending and unfair contract terms coming under the spotlight.
The hearings will consider the conduct of several of the leading banks in respect of their dealings with small and medium enterprises, in particular in providing credit to businesses.