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An Australian bank has been slapped with almost $1m in fines after it was found to have provided inaccurate home loan information to its customers.
Members Equity (ME) Bank was ordered to pay $820,000 by the Federal Court after pleading guilty to criminal charges of making false and misleading representations and failing to provide required written notices regarding home loans.
The Australian Securities and Investments Commission (ASIC) took the bank to court over the charges.
Between May 25 and September 3, 2018, ME Bank send 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.
“Some customers were charged missed payment fees because they did not have sufficient funds made available to meet the correct repayment amount,” a court judgment states.
“The total of all the missed payment fees charged was $3854.93, which has been fully refunded.”
ME Bank also admitted to failing to send letters to some customers for 14 months to inform them their repayments were changing after the expiry of an interest-only or fixed-rate period.Apology letters were written to the hundreds of customers and two guarantors affected.
Federal Court Justice Robert Bromwich none of the affected customers suffered any financial loss and ME Bank did not gain anything.
However, he said there was a potential for people to be “prevented from or disadvantaged as to being able to query, renegotiate or refinance their loans before the changes came into effect”.
ME Bank had contacted the affected customers and offered to remediate by placing them in the same position they would have been in, had the omissions not taken place.
“While the omissions for the remaining charges remain of serious concern and require general deterrence, the active provision of incorrect information is inherently more serious,” Justice Bromwich said.
“Especially given that ME Bank was fully able to prevent, or detect and rectify the issue, if it had the systems and corporate will to do so.”
ME Bank was acquired by the Bank of Queensland (BOQ) in July 2021.”
ME Bank was handed a $750,000 fine for the charge under the ASIC Act, and fined another $70,000 for charges under the National Credit Code.
“Banks are expected to properly notify and update customers who are entitled under the law to receive accurate information about changes to their loans,” ASIC Executive Director for Enforcement and Compliance Tim Mullaly said.
“Where banks fail to meet these requirements, they can face criminal convictions.”
In a statement, the BOQ Group said they accepted the Federal Court decision.
“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,” a spokesman said.
“ME Bank apologised to and remediated all affected customers in 2019.
“ME Bank and, following the acquisition, the BOQ Group have co-operated at all times with ASIC and the Commonwealth Director of Public Prosecution.”
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