The Federal Court has ruled that the Commonwealth Bank broke laws when charging an interest rate on business overdraft accounts that were up to more than double what customers were told.
The Federal Court made declarations that CBA made false or misleading representations and engaged in misleading and deceptive conduct on 12,119 occasions.
The court also ruled that on each of the occasions, the major bank breached sections of the ASIC Act as well as its general obligation as a financial service licensee to comply with financial services laws, in contravention of the Corporations Act.
ASIC alleged, and CBA admitted, that from 1 December 2014 to 31 March 2018, the bank had:
The total overcharged interest exceeded $2.2 million. CBA has set up a remediation program that has so far compensated $3.74 million to the customers affected.
The misconduct, which had been a case study during the royal commission, resulted from inadequate systems and processes, according to the corporate regulator. ASIC commenced proceedings against the bank in regards to the matter on 30 November.
ASIC commissioner Sean Hughes commented: “Financial services institutions need to have appropriate systems, governance and controls in place to ensure they deliver on promises made to their customers. By CBA failing to take adequate steps to rectify this error after it was identified, this resulted in customers continuing to be overcharged.
“Investment in good systems needs to be prioritised by all financial services institutions to ensure trust in our financial system is re-built and to avoid a repeat of these failures in the future.”
ASIC will seek penalties and other orders against CBA at a hearing on 6 April.
The regulator had previously obtained a $5 million penalty against the bank for failures of its AgriAdvantage Plus Package, which included among other factors, overcharged interest on loans and fees.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].