The financial services watchdog has dragged Australia’s biggest bank back to court over the slugging of inflated interest charges upon more than 2200 customers.
The Commonwealth Bank is accused of charging 34 per cent interest on business overdraft accounts between December 2011 and March 2018 despite the advertised rate of between 14.55 per cent and 16 per cent.
The difference netted the bank more than $2.9 million, financial regulator ASIC said in court papers on Tuesday.
Overdraft is a form of credit granted when an account reaches zero – allowing customers to withdraw more funds than are available.
“CBA has cooperated fully with ASIC’s investigation and does not intend to defend the proceedings,” the bank said in a statement on Tuesday.
A customer reported the issue to CBA in August 2013 – leading to a manual fix two months later.
But the bank hadn’t properly identified the majority of the affected customers and wasn’t applying the fix in some circumstances due to a software bug, ASIC says.
The regulator, which can only sue for alleged breaches in the past six years, says the affected customers were sent 12,119 statements from December 2014 onwards containing false and misleading representations about their overdraft interest rate.
The average customer was out of pocket about $1500 with one customer overcharged by $17,522.
ASIC wants the Federal Court to find CBA made false or misleading statements, in breach of federal laws, and that the bank also broke its obligations under the corporations act regarding financial services laws.
It also seeks a fine “as the court determines to be appropriate” and an order forcing the bank to acknowledge any fine and determination publicly.
ASIC accepts in its claim that CBA remediated customers in two tranches between 2016 and 2019, and undertook manual reviews.
The conduct was subject of a case study by the banking royal commission.
In a statement to the ASX, the bank said the problems that caused the error have been addressed and 2269 customers have been sent refunds.
“The combined total of refunds … was $3.74 million and the remediations program has now concluded,” it said.