Last month, it was reported that super fund-owned lender ME Bank had reduced the amount borrowers could redraw from specific legacy mortgage products without forewarning customers.
While permitted under ME’s terms and conditions, the policy decision was met with backlash from customers, brokers and the broader community.
In response, ME announced that it would review its decision in consultation with affected customers before revealing that it had decided to “change back” home loan redraw limits for any customers who wish to opt out.
Following on from the controversy, the House of Representatives’ standing committee on economics called “an urgent public hearing” to hear from ME Bank and Industry Super Australia.
Appearing before the committee on Thursday (14 May), ME Bank CEO Jamie McPhee acknowledged that while the decision was “poorly communicated”, he believed the bank made the right call.
“We absolutely believe that the decision we made was the right decision, because we want to [make] sure people don’t inadvertently overcommit,” he said.
“We think it’s the right decision, poorly communicated.”
He added: “In speaking to customers, the feedback is that they understand the decision and why the bank was making the decision, but that we didn’t communicate it properly.”
When asked why ME Bank had not reinstated all funds to affected customers, Mr McPhee said the lender wanted to provide borrowers with the choice to pay down their home loan.
“We didn’t want to make the mistake the second time, so we feel that the appropriate thing was to make it very easy to contact the bank either via the phone or online and request for us to make an adjustment either part or in full, and handling the request rather than applying it across the customer base,” he said.
Mr McPhee told the parliamentary committee that an average of approximately $17,000 in redraws were reduced per customer across a total of $1.8 billion in loans.
However, according to Mr McPhee, only 8 per cent of affected customers have since decided to reinstate their funds either partly or in full.