Two of Australia’s biggest banks are having to refund consumers after mortgage errors
Two of Australia’s biggest banks are facing massive payouts to mortgage holders after interest based errors meant some consumers have been paying too much interest. In an internal review, NAB discovered they had been charging too much interest to nearly 1000 mortgage customers because it failed to properly set up their offset accounts. The banks own review found that between April 2010 and August 2017 it had not linked some offset accounts to loans set up by brokers.
NAB’s failure to link the offset accounts to mortgages meant that money held in the accounts did not reduce the interest payable on the home loans. As a result of this error, National Australia Bank has refunded $1.7 million to 966 home loan customers. Concerning this NAB failure, Acting ASIC chair Peter Kell has said “Consumers should be confident that when they sign up for a home loan they are receiving all of the benefits that are being promoted”.
In a similar case, Westpac is having to repay $11 million to around 9400 mortgage holders due to a systems error affecting some loans going back as far as 25 years. The error occurred as the bank had failed to switch the owner-occupiers, who had interest only home loans, to principal and interest mortgages at the end of their interest-only period. In response, Westpac has committed to refunding the additional interest paid by its customers, and further discount the interest rate for the remaining term of the loan so that customers pay no more interest over the life of the loan than they would have, had the error not occurred.
Again, acting chairman of ASIC Peter Kell, has had his say, noting that “all banks should be reviewing their systems to ensure that they minimise the chance of any such errors occurring, and that any risks to consumers are identified early. If past errors are identified, remediation needs to be timely, transparent and effective”.
What has been the response?
Westpac’s chief executive, George Frazis said the bank had identified the issue and worked with ASIC on its response. “Our approach is to ensure no owner-occupier customer pays more interest over the originally intended loan term as a result of our mistake, we apologise unreservedly for the error and have now automated the switching process to ensure it does not happen again” he said.
It is expected to take up to 12 months to complete the remediation programme for all affected customers.
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