The Australian Securities and Investments Commission (ASIC) has declared it will seek pecuniary penalties and other orders against the Commonwealth Bank following the Federal Court finding the bank overcharged interest on business overdraft accounts.
In a case which flowed from a Royal Commission case study, the Federal Court made declarations that that the Commonwealth Bank made false or misleading representations and engaged in misleading and deceptive conduct on 12,119 occasions when charging a rate of interest on business overdraft accounts substantially higher than what its customers were advised.
The court also made a declaration that on each of the 12,119 occasions the bank breached the ASIC Act and also breached its general obligation as a financial service licensee to comply with financial services laws in contravention of the Corporations Act.
ASIC alleged, and CBA admitted, that from 1 December 2014 to 31 March 2018, CBA:
- provided customers with terms and conditions for certain credit facilities that stated an interest rate to be charged or that had been charged (in most cases, 16% per annum)
- sent periodic account statements to customers referencing the rate at which interest rate was being charged (in most cases, 16% per annum), and
- due to a systems error, 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 $2.2 million. ASIC considers that CBA’s conduct in this matter, which was examined in detail during the Financial Services Royal Commission, resulted from inadequate systems and processes.
A penalty hearing will be held on 6 April.