The Commonwealth Bank delayed payments to customers who had been charged twice on bank overdraft interest to dodge a Parliamentary inquiry in March last year.
The bank’s executive general manager of retail products Clive van Horen told the financial services royal commission that after the bank had agreed to repay $3 million to 2700 overcharged customers he had personally made the call to hold off sending the letters for 10 days.
“You asked for all this to happen after the House of Representative hearings on 7 March so as to eliminate the chance of this being brought up in the hearings,” said counsel assisting Albert Dinelli.
“That’s right,” Mr van Horen said. “I think it was very poor judgement on my part.”
The desire to delay contacting customers to avoid scrutiny by the inquiry examining banking was was openly acknowledged within the bank. In an internal email he asked “can we make all this happen (letters and actual refunds) after the House of Reps hearing on 7 March”?
“[it] eliminates the chance of this being brought up in the hearings and a delay of 10 days is immaterial.”
“It might be open to say CBA here was more affected by media and PR than ensuring the right thing by its customers,” Mr Dinelli said.
The overcharging happened as a result of a computer glitch that saw an interest rate of 17.9 per cent added to the existing 16 per cent interest rate on some overdraft accounts which emerged in 2013. It means small business customers were paying 33.9 per cent on their overdrafts
When CBA became aware of it a manual checking process was implemented which “worked for 95 per cent of customers,” Mr van Horen said.
A customer, who owned a hairdressing business, complained to the bank in 2015 and the Financial Ombudsman Service (FOS) a year on saying “my account was being drained completely. I had to borrow money from a family member to put into the account and that money was taken as soon as it hit my account.”
Her accountant advised her she could not borrow more and “that I should be prepared to close down my business and probably lose my home as well”.
When the bank admitted liability a fight began. The customer first asked for $100,000 compensation while the bank offered to pay $50 a week for life. The customer then asked for $10,000 while the CBA offered $2750.
That offer was rejected and FOS ruled she be paid $1500. The customer’s debt was $3494
In 2015 CBA remedied the problem with an automated solution. Mr van Horen raised the ire of Commissioner Kenneth Hayne by describing the error as complicated and technical.
The Commissioner characterised it as simply a mistake that had resulted in people paying twice the interest they were liable for on business overdrafts. “Well lets hear no more about how technical it is,” he said.
Mr van Horen said that the problem had applied to a small number of people. “If you, one of those customers affected and you’re waiting for your refund it’s very material to you however it was less than 1500 customers out of 10 million.”
CBA did not report the overcharging to regulator ASIC till May 2017.