An Australian bank has been fined almost $1 million after it was found to have provided incorrect information about home loans to its customers.
Members Equity (ME) Bank was ordered by the Federal Court to pay $820,000 after pleading guilty to criminal charges of making false and misleading statements and failing to provide required written notices in relation to home loans.
The Australian Securities and Investments Commission (ASIC) has taken the bank to court over the charges.
Between May 25 and September 3, 2018, ME Bank sent 589 letters to home loan customers informing them of incorrect minimum repayment amounts due after the expiry of a fixed-rate or interest-only period.
Each of the letters stated a repayment amount that was less than the actual amount needed to repay the loan.
“Some customers were charged missed payment fees because they did not have sufficient funds to make the correct repayment amount,” a court ruling said.
ME Bank was fined $820,000 after pleading guilty in Federal Court to false and misleading statements and failing to provide required written notices in relation to home loans. Image: NCA NewsWire
“The total of all missed payment fees was $3,854.93, which has been fully refunded.”
ME Bank also admitted failing to send letters to some customers for 14 months informing them that their repayments were changing after the expiry of an interest-only or fixed-rate period.
Letters of apology were written to the hundreds of affected customers and two guarantors.
Federal Court Judge Robert Bromwich said none of the affected customers suffered any financial loss and ME Bank gained nothing.
However, he said there is a possibility that people will be “prevented or disadvantaged in their ability to access, renegotiate or refinance their loans before the changes come into effect.”
ME Bank had contacted the affected customers and offered to make amends by placing them in the same position they would have been in had the negligence not occurred.
“While the omissions on the remaining charges remain a serious problem and require general deterrence, actively providing false information is inherently more serious,” Judge Bromwich said.
‘Especially given that ME Bank was fully capable of preventing the problem, or detecting and resolving it, if it had the systems and business will in place to do so.’
ME Bank was acquired by the Bank of Queensland (BOQ) in July 2021.
ME Bank was fined $750,000 for the charge under the ASIC Act, and a further fine of $70,000 for the charge under the National Credit Code.
“Banks are expected to properly notify and notify customers who are legally entitled to accurate information about changes to their loans,” said Tim Mullaly, ASIC’s executive director of enforcement and compliance.
‘If banks do not meet these requirements, they can be criminally convicted.’
In a statement, the BOQ Group said it accepted the Federal Court’s decision.
“The events that are the subject of the proceedings occurred before the takeover of ME Bank by the BOQ Group and the fine imposed by the court was provided for as part of the takeover,” a spokesperson said.
‘ME Bank apologized to all affected customers in 2019 and reinstated all affected customers.
‘ME Bank and, post-acquisition, the BOQ Group have cooperated at all times with ASIC and the Commonwealth Director of Public Prosecution.’