ME Bank scrambles in face of redraw reduction controversy

4 May 2020

Industry superannuation funds-backed bank, ME Bank, has run into a wall of negative publicity and criticism after it appeared to unilaterally reduce clients’ mortgage positions by reducing their drawdown facilities.

Newspaper reports over the weekend saw ME Bank being heavily criticised for having made the move without appearing to have first contacted to client to inform of them.

In an explanation issued on Saturday, ME identified claimed it had undertaken the move to help some customers and prevent them from falling behind on their original repayment schedules.

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“…the redraw facility on some legacy home loans could lead to some customers falling behind their original repayment schedules,” it said. “The redraw facility gives customers access to payments that they have made ahead of their repayment schedule.

“By not reducing the available redraw amount over time, customers could overuse the redraw to a point where they could fall behind their original repayment schedule. This can put customers at risk of not meeting their repayment commitments, potentially leaving them open to financial hardship at the end of the loan term.

“No money has been removed from customer accounts. The adjustment made is to the amount available for redraw,” the bank’s explanation said.

“We understand that the change has caused concern to some customers, particularly in the current environment. We are reviewing the personal circumstances of each customer affected and are committed to working with them to determine how we can help with their individual financial needs.”

The bank said it was in the process of contacting affected customers to see if any support was required and offering options such as rearranging financing at the Bank’s cost for customers whose redraw limits have been reduced and offering customers access to the three and six month repayment holidays.

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Union bank ("Members Equity") and Union super ("Industry funds") customers need to quit their moaning, and just accept that the union always knows what's best for people. If you didn't want the unions to control your finances, why did you give them your money in the first place? It's not as if they don't have decades of form, bossing people around and interfering in their lives.

ME bank is heavily reliant on mortgage broker referrals, so they are stuffed now. Whoever made the decision must have been desparate or stupid. Another unlisted asset that industry funds will need to write down.

Could this be an indication that "loans" were actually listed as CASH by the super fund, and since super funds need cash at present, anything affects the loan income is a disaster for the super fund?

Don't you just love the constant and repetitive term used by banks, super funds and insurance companies as " legacy " products as though these are in some way a problem for these institutions and must be dealt with a different manner to their more contemporary offerings.
When these products were implemented they were cutting edge and competitive, but over time the customers who remain in these products for various reasons and have been loyal to the institution are often treated poorly simple through maintaining a consistent product and consistent payment.
If I am reading this situation correctly, a re-draw facility would have been created through a build up of excess payments to a mortgage to create a facility to access funds if needed at some stage in the future.
Have ME Bank transferred the excess amounts paid in the form of a re-draw facility away from being available to their customers in a bid to " protect them from themselves " without the authority of those customers to do so ?
So, if you were $50,000 in advance of your home loan and that amount was previously available for re-draw, this option has now been removed?

When this broke on the weekend, reading the comments on the SMH, the union trolls were out in force, so this tells me they are scared of this and the brand damage its done to them. It will take the best spin doctors the ISA has to get out of this one. Shoes on the other foot now

Perhaps ME Bank has a problem with their capital requirements - they could perhaps go to their shareholders and raise some capital - or perhaps the shareholders of ME Bank have already told them not to ask as they might be a little short of cash themselves?

Incredulously Me bank have removed a second amount from my redraw today. Foolishly I had not moved my already reduced redraw amount out of the home loan account, I have now.

Send a copy of your bank statement to Adele Ferguson from Fairfax. She is the one who first broke the story. The only way to fix this behaviour is through public pressure via the media. ME Bank need to be sent a message that the public won't stand for it. Otherwise, if they get away with it, they will go further and other banks may do the same thing. so it needs to be nipped in the bud and fast!!!

Yeah, maybe don't do that as you would have to redact the account number and so on.
Just send her an email.

ME Bank's purpose statement:
" We've been helping everyday Australians get the most out of their money since 1994- and that's not changing"
It seems you can't get the most out of your money if the re-draw facility that you had been working with or building over time has been deliberately removed from being a re-draw facility without your authority !

My ME bank repayments are way ahead.
One of the loans the repayment is not due till 2073
& the other loan not till 2032.
How can i be deemed as a risk .???
ME bank please explain.

You are deemed a risk because ME Bank said so and made a decision in their best interest and without your authority or asking if the proposed changes were suitable to you.
This is about ME Bank protecting themselves as a priority and reducing or removing a benefit from the customer.

Disgraceful behaviour. Never before have the Big 4 and retail advised super looked so good.

Rather than someone electing to access an early super release in order to meet ongoing expenses and impacting their long term retirement savings through drawing funds in a flat bear market , they may have been able to access all or part of their re-draw facility created through paying in advance of the regular repayment schedule whilst not impacting their regular repayments.
However, it appears that ME Bank have made this decision for their customers in order to protect them from themselves ?

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