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Members Equity Bank Limited (ME Bank) – now part of BOQ Group – has been ordered by the Federal Court to pay a penalty of $820,000 after pleading guilty to criminal charges of making false and misleading representations and failing to provide required written notices regarding home loans.
The charges related to behaviour between 25 May 2018 and 3 September 2018, when ME Bank sent 589 letters to home loan customers informing them of incorrect minimum repayment amounts to be paid after the expiry of either a fixed-rate or interest-only period.
Each of the letters contained a repayment amount that was less than the actual amount required to repay the loan.
The total of all the missed payment fees charged was $3,854.93, which has been fully refunded.
The court also found that, between 28 December 2016 and 23 February 2018, ME Bank failed to send letters to some customers to inform them that the interest rate and minimum repayment amount were changing after the expiry of an interest-only or fixed-rate period.
Specifically, it was found to have failed 28 times to give debtors written notice setting out the particulars of a change in the amount of the minimum repayments under a credit contract by no later than 20 days before that change took effect. It was also found to have failed 414 times to give debtors written notice setting out the particulars of a change in the amount of the minimum repayments under a credit contract by no later than 20 days before that change took effect.
While the affected customers did not suffer any financial loss due to the offending conduct, the potential was for them to be prevented from or disadvantaged as to be able to query, renegotiate, or refinance their loans before the changes came into effect.
The misconduct occurred due to failures in the bank’s systems and processes.
Prior to sentencing, ME Bank had pleaded guilty to charges of:
- Making false and misleading representations in letters to its home loan customers, in contravention of sections 12DB(1)(g) and 12GB(1) of the Australian Securities and Investments Commission Act 2001.
- Failing to provide written notice about annual interest rate and repayment amount changes, in contravention of ss 64(1) and 65(1) of the National Credit Code.
Its $820,00 penalty includes $750,000 for the charge relating to making false and misleading representations and $70,000 for the failure to provide written notice.
The matter was prosecuted by the Commonwealth Director of Public Prosecutions following an investigation and referral by ASIC.
ASIC’s executive director for enforcement & compliance Tim Mullaly commented: “This misconduct arose from ME Bank failing to send accurate home loan information to its customers.
“Banks are expected to properly notify and update customers who are entitled under the law to receive accurate information about changes to their loans. Where banks fail to meet these requirements, they can face criminal convictions.”
In a statement following the announcement, BOQ Group stated: “The BOQ Group acknowledges and accepts the Federal Court decision handed down today in the proceeding commenced by ASIC against ME Bank.
“The events that are the subject of the proceeding occurred prior to the acquisition of ME Bank by the BOQ Group and the penalty imposed by the Court was provisioned as part of the acquisition.
“ME Bank apologised to and remediated all affected customers in 2019. ME Bank and, following the acquisition, the BOQ Group have cooperated at all times with ASIC and the Commonwealth Director of Public Prosecution.”
Impacted customers have already been remediated by ME Bank.