The federal court has found CBA to have made false or misleading representations and engaged in misleading and deceptive conduct on more than 12,000 occasions in charging an interest rate on business overdraft accounts that was substantially higher than what customers were told it would be.
After proceedings were commenced against CBA on 30 November 2020, the major bank was found to have failed to meet its general obligation to comply with financial services laws as a financial service licensee.
From 1 December 2014 to 31 March 2018, ASIC alleged – and CBA admitted – that the group gave customers credit facilities that included terms and conditions detailing the interest to be charged or that had been charged. In most cases, the rate came in at 16% per annum.
The major even sent periodic account statements to customers referencing that same listed rate as the rate that was indeed being charged.
However, due to a systems error, the bank charged more than 1,510 customers a different, higher interest rate on their overdraft accounts – in most cases, approximately 34% per annum.
The total overcharged interest exceeded $2.2m.
The behaviour was examined in detail during the royal commission, whereupon ASIC found CBA’s misconduct was a result of inadequate systems and processes.
ASIC Commissioner Sean Hughes said, “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.”
While CBA has already set up a remediation program that has thus far compensated $3.74m to the customers impacted, ASIC will seek pecuniary penalties and other orders against the bank at a penalty hearing set for 6 April 2021.
