ME Bank, now owned by the Bank of Queensland, has been fined $820,000 (US$540,000) for misleading its home loan customers on changes to minimum repayments. The institution pleaded guilty to four charges in the Federal Court and was sentenced on Jan. 19. It admitted that between December 2016 and February 2018 it failed to send letters to almost 500 customers whose loan repayment arrangements were due to expire. The court found that none of the affected customers suffered a financial loss, but they were deprived of the opportunity to renegotiate their loans before the changes took effect.
Additionally, the bank sent 589 letters to customers between May and September 2018 that misstated their new minimum repayment after their fixed-rate or interest-only home loan period ended. Customers were not charged the incorrect amount as a result of the letters, but some did incur missed payment fees because they had insufficient funds in their accounts. The total of the missed payment fees charged was $3854.93 (US$2542.75), which the bank fully refunded. ME Bank first noticed the potential for issues in its loan administration software during a 2015 internal audit but failed to investigate further.
The bank only identified the problem in 2018 after years of misleading customers and self-reported the offending to the Australian Securities and Investments Commission later that year. The bank told the Federal Court the offenses were caused by a technical issue and the consequences of the conduct were minor, given most customers did not incur a financial loss. However, Federal Court Judge Robert Bromwich said the bank failed to take the initial audit seriously. He stated, “Not having adequate prevention, detection, and rectification systems in the first place, and not taking that audit warning seriously enough is important and significant.” The bank was convicted and fined $820,000, which will need to be paid within 60 days.