National Australia Bank will refund nearly $2 million to customers who were overcharged interest on their home loans over seven years.
The bank said 966 customers will get compensation of $1.7 million after the bank failed to properly set up mortgage offset accounts and customers paid too much interest.
The Australian Securities and Investments Commission (ASIC) said the bank investigated the issue after complaints from customers.
The bank found that between April 2010 and August 2017 it had not linked some offset accounts to loans set up by mortgage brokers, meaning that those customers overpaid interest on their mortgage.
NAB is contacting and refunding affected customers so they are only charged interest that would have been payable had the mortgage offset account been properly linked to the home loan.
NAB general manager for home lending Meg Bonighton said the problem was a mistake.
“We sincerely apologise to our customers for this, which was due to administration errors,” she said.
“NAB advised ASIC about this matter earlier this year and, over the past 12 months, has implemented a number of measures to improve offset origination processes, and enhanced the ability for customers to review their offset arrangements themselves.”
Ms Bonighton said affected customers represented less than 1 per cent of mortgage offset accounts set up by mortgage brokers since 2010.
NAB will also refund customers who have already paid off their home loan.
Acting ASIC chairman Peter Kell said that when banks made mistakes they should take timely action so that customers are not disadvantaged.
“Consumers should be confident that when they sign up for a home loan they are receiving all of the benefits that are being promoted,” he said.
The move follows Westpac’s announcement last week that it would refund $11 million to 13,000 customers after mistakes on their interest-only loans cost them money.