Judge orders National Australia Bank to pay $2.1 million fine after overcharging customers
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Financial institutions play an important role in our lives.
So, when we hear stories of banks allegedly taking unfair advantage of their customers, it's hard not to feel a bit betrayed—which is exactly what many had been feeling when they heard about the National Australia Bank (NAB) being fined $2.1 million for wrongfully overcharging its customers for over 18 months.
Between January 2017 and July 2018, NAB wrongfully charged $139,845 of periodic payment fees on 74,593 occasions to 2,888 personal and 513 business banking customers.
The amount of money that was actually overcharged dates back to 2007, but according to Federal Court Justice Roger Derrington, it was only in late 2016 that the bank became aware of the charges.
Justice Derrington noted that NAB ‘unjustifiably advanced its self-interest’ by still charging its ‘oblivious’ customers after the discovery.
Last Friday, he wrote in an order: ‘It deliberately and cynically took advantage of its customers’ unawareness and was prepared to allow the overcharging to continue whilst it searched, admittedly in good faith, but without any great diligence, for a solution.’
So why were the customers charged? The problem reportedly stemmed from human error when NAB staff set up automated payments.
Between July 20, 2007, and February 22, 2019, the bank’s terms and conditions stated that $1.80 would be charged for periodic payments to other accounts with NAB and $5.30 for periodic payments to accounts with another bank.
They also mentioned certain transactions were exempted from these charges.
However, the bank charged customers periodic payments entitled to exemptions; for some, the incorrect amount was charged (some customers paid $5.30 when the correct fee was $1.80).
Despite the bank setting up internal investigations into the issue, Justice Derrington noted that they did not ‘remedy the system’s dysfunctionality, short of shutting it down altogether’.
It was reported that NAB did so in July 2018 and stopped charging periodic payment fees altogether on February 22, 2019.
Justice Derrington believed that imposing a penalty of $2.1 million (the maximum possible) was ‘woefully inadequate’ for the bank’s ‘unconscionable conduct’ and doubted it would significantly impact their conduct in the future.
‘In a context where NAB has been a repeat offender against the financial services legislation in this country and, as this case and others reveal, it appears to place a low priority on respecting the legal rights of its customers, a penalty several times the statutory maximum would have been far more appropriate,’ he explained.
Apart from the penalty, NAB was required to publish a notice on its website and pay the Australian Securities and Investments Commission’s (ASIC) legal costs.
The ASIC Chair, Sarah Court, said, ‘It took NAB over two years to stop charging these incorrect fees, which was clearly unacceptable.’
‘If systems have let customers down, we expect all financial institutions, especially our banks, to act quickly to reduce consumer harm,’ she added.
ASIC claimed that the bank was liable for each incorrect fee, and the maximum penalty could have reached $130 billion, but Justice Derrington found them only responsible for one violation.
It was understood that NAB had paid more than $8 million to affected customers who incurred incorrect payment fees.
They also apologised for the issue: ‘We have completed a remediation program to set things right and repaid more than $8.3 million of fees plus interest to affected customers.’
What do you think of this story, members? Have you, or anyone you know, been charged wrongfully by a bank? Share your experience in the comments below!
So, when we hear stories of banks allegedly taking unfair advantage of their customers, it's hard not to feel a bit betrayed—which is exactly what many had been feeling when they heard about the National Australia Bank (NAB) being fined $2.1 million for wrongfully overcharging its customers for over 18 months.
Between January 2017 and July 2018, NAB wrongfully charged $139,845 of periodic payment fees on 74,593 occasions to 2,888 personal and 513 business banking customers.
The amount of money that was actually overcharged dates back to 2007, but according to Federal Court Justice Roger Derrington, it was only in late 2016 that the bank became aware of the charges.
National Australia Bank (NAB) was fined $2.1 million for wrongfully overcharging its customers over 18 months. Credit: Wil/Flickr
Justice Derrington noted that NAB ‘unjustifiably advanced its self-interest’ by still charging its ‘oblivious’ customers after the discovery.
Last Friday, he wrote in an order: ‘It deliberately and cynically took advantage of its customers’ unawareness and was prepared to allow the overcharging to continue whilst it searched, admittedly in good faith, but without any great diligence, for a solution.’
So why were the customers charged? The problem reportedly stemmed from human error when NAB staff set up automated payments.
Between July 20, 2007, and February 22, 2019, the bank’s terms and conditions stated that $1.80 would be charged for periodic payments to other accounts with NAB and $5.30 for periodic payments to accounts with another bank.
They also mentioned certain transactions were exempted from these charges.
However, the bank charged customers periodic payments entitled to exemptions; for some, the incorrect amount was charged (some customers paid $5.30 when the correct fee was $1.80).
Despite the bank setting up internal investigations into the issue, Justice Derrington noted that they did not ‘remedy the system’s dysfunctionality, short of shutting it down altogether’.
It was reported that NAB did so in July 2018 and stopped charging periodic payment fees altogether on February 22, 2019.
Justice Derrington believed that imposing a penalty of $2.1 million (the maximum possible) was ‘woefully inadequate’ for the bank’s ‘unconscionable conduct’ and doubted it would significantly impact their conduct in the future.
‘In a context where NAB has been a repeat offender against the financial services legislation in this country and, as this case and others reveal, it appears to place a low priority on respecting the legal rights of its customers, a penalty several times the statutory maximum would have been far more appropriate,’ he explained.
Apart from the penalty, NAB was required to publish a notice on its website and pay the Australian Securities and Investments Commission’s (ASIC) legal costs.
The ASIC Chair, Sarah Court, said, ‘It took NAB over two years to stop charging these incorrect fees, which was clearly unacceptable.’
‘If systems have let customers down, we expect all financial institutions, especially our banks, to act quickly to reduce consumer harm,’ she added.
ASIC claimed that the bank was liable for each incorrect fee, and the maximum penalty could have reached $130 billion, but Justice Derrington found them only responsible for one violation.
It was understood that NAB had paid more than $8 million to affected customers who incurred incorrect payment fees.
They also apologised for the issue: ‘We have completed a remediation program to set things right and repaid more than $8.3 million of fees plus interest to affected customers.’
What do you think of this story, members? Have you, or anyone you know, been charged wrongfully by a bank? Share your experience in the comments below!
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