Speaking at an emergency committee hearing held yesterday, 3 June, ASIC Commissioner Sean Hughes addressed the ongoing circumstances around ME Bank’s redraw issue.
ASIC first became aware of the issue in March 2013, when an error in ME Bank’s legacy platform resulted in a number of home loan holders being incorrectly notified with the amount available for redraw; as such, 416 customers fell behind on repayments due to the over-extended facility and a further 6,554 were identified as at risk of doing the same.
ME informed ASIC the 416 customers would be contacted by telephone and the larger group of at-risk customers contacted by letter to explain the error and inform them of their correct redraw amount. The bank enacted the plan and ASIC didn’t receive any customer complaints at that time.
Over six years later, on 10 December 2019, ME Bank sent a self-report informing ASIC that the redraw error had reappeared in 2015 but was not identified by the bank until October 2019.
This time around, ASIC again stressed the importance of ME Bank offering an effective and prompt explanation to customers, emphasising “the particular sensitivities” around reducing access to funds customers had thought they were entitled.
However, ME Bank made adjustments to approximately 21,000 customers’ home loan redraw facilities between 23 and 27 April 2020 before ASIC was able to raise any concerns regarding the bank’s communication and remediation plan.
“ASIC does have concerns about how this matter has been handled,” said Commissioner Hughes.
“At a time when there are significant sensitives for consumers about the economic impacts of the COVID-19 pandemic, this matter could have and should have been handled better by ME Bank.
“It was ASIC’s expectation that ME Bank would communicate with their customers in a clear and transparent manner before making any adjustments to redraw facilities.
“This should have occurred in any normal setting, but in this instance there should have been heightened awareness and sensitivity to explain to customers what was happening to their account balances and why, given the strained economic environment impacting households.”
Thus far, AFCA has received approximately 80 complaints regarding the redraw issue. However, many have already been dealt with and AFCA is confident that most, if not all, will be resolved at an early stage.
“ASIC will continue to closely monitor ME Bank’s conduct and engage with the bank on this issue, so as to ensure a fair and transparent outcome for ME Bank’s customers,” said Hughes.
“This has been a disappointing experience for ME Bank and has had an avoidable impact on customer confidence,” he finished.
