Commonwealth Bank overcharged customers with business overdraft accounts, then tried to keep quiet on the resulting fallout and delayed making repayments to customers, the Royal Commission into misconduct in the financial sector heard yesterday.
The overpayments related to two types of accounts called business overdrafts and simple business overdrafts.
The accounts were aimed at small business and with an interest rate of 16%.
However, a computing glitch at the bank meant hundreds of customers were charged a rate of 33.94%.
The bank ultimately paid remediation funds of almost $3 million to 1,490 business banking customers affected.
The average time between when customers were overcharged and when they were reimbursed was 960 days.
The higher rate was applied to around 300 business overdraft accounts and 2,500 simple business overdraft customers.
And it wasn’t until a customer made a complaint in 2013 that CBA addressed the problem.
Counsel assisting the commission, Albert Dinelli, read out a letter yesterday from the customer which alerted CBA of the error.
“My business account was being drained completely. It didn’t matter how much I was trying to pay back my overdraft and high interest charges, I could not get ahead.”
But even then, the bank delayed an investigation into the matter. CBA ultimately offered the customer a settlement of $2,750 which they rejected, before takng their complaint to the Financial Ombudsman’s Service (FOS).
Under questioning from Dinelli, CBA’s executive general manager of retail products, Clive van Horen, said that was the catalyst for the bank to act.
“Had the customer not taken the complaint to FOS, the CBA would not have realised that this overcharging issue was a high priority?,” Dinelli asked.
“That was certainly the trigger,” Mr van Horen said.
The executive said the bank implemented a manual process to prevent customers being overcharged, but it didn’t work. And even after the problem was highlighted, the bank took two more years to fix it.
The commission also heard that CBA delayed sending letters to customers about the overcharging until after an appearance before the House of Representatives standing economics committee, which was looking into misconduct in March 2017.
The email from van Horen was tabled to the commission showeing he wanted to keep the matter under wraps.
“Can we make all this happen, letters and actual refunds, after House of Reps hearing 11 March,” his email said. “Eliminates the chance of this being brought up in the hearing and delay of 10 days is immaterial.”
Van Horen conceded that the move was motivated by the desire to avoid bad publicity for the bank.
He called the issue “very small in the scheme of things”, and said the overcharging related to 1,500 customers out of more than 10 million.
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