CBA to pay $7 million for overcharging customers on interest
The Federal Court has imposed a $7 million penalty on Commonwealth Bank for charging higher interest rates on business overdraft accounts than what it advised its customers over a four-year period.
Following an investigation by ASIC, CBA admitted to false or misleading representations and engaged in misleading and deceptive conduct over to 12,119 occasions from 1 December 2014 to 31 March 2018.
The bank advised customers with certain credit facilities they would be charged a 16% interest rate and were sent account statements showing this interest rate.
However, due to a system error more than 1500 customers were charged a 34% interest rate on their overdraft accounts totalling $2.2 million.
In 2013, CBA allegedly tried to manually fix the overcharging but was unsuccessful and customers continued to be incorrectly charged.
CBA has remediated $3.74 million to the customers impacted in this case.
In the hearing, CBA said an appropriate penalty was between $4 million and $5 million yet ASIC submitted a penalty of $7 million.
Justice Lee rejected the submission that CBA tried to quickly remedy the error and found the delay "particularly troubling".
As such, ASIC commissioner Sean Hughes said when financial institutions discover overcharging, they must take immediate action to remediate impacted consumers.
"Financial services institutions need to have appropriate systems, governance and controls in place to ensure they deliver on promises made to their customers," he said.
ASIC first commenced proceedings in November 2020 and noted in its statement of claim the average amount customers were overcharged was about $1476.90 in relation to the CBA Simple Business Overdraft products and $3965.30 in relation to CBA Business Overdraft products, per customer.
Last week ASIC commenced civil proceedings against the bank over allegations it incorrectly charged $55 million in monthly access fees to nearly one million customers who met criteria that entitled them to fee waivers.