ANZ Bank has restricted access to loan redraw facilities for thousands of customers after discovering it had accidentally inflated their account balances by millions of dollars.
The bank said the error has affected 200,000 accounts and it has warned customers not to overdraw their accounts until the mistake has been rectified.
Australia’s fourth largest bank restricted access to $8.7 million worth of balances in its loan redraw facilities, and has refunded more than $11 million in interest payments to customers who have drawn on their mistakenly inflated balances.
The bank said it discovered the problem last year and had begun to contact customers, but paused the project because of the summer bushfires and COVID-19 pandemic.
It restarted the program in recent weeks and has been contacting customers to caution them not to overdraw their redraw facilities until the error is fixed.
“ANZ identified an issue that meant some customers had been able to redraw facilities more than the amount made in early or additional repayments. As a result, customers may have had access to extra redraw,” a bank spokesman told the ABC.
“Since that time we have been working through the affected accounts, and progressively, contacting our customers and fixing the issues.
“To date we have rectified more than half the affected accounts and refunded more than $11 million [in interest payments] to customers.
“We have also removed about $8 million in excess redraw.”
Average redraw error was $264
ANZ said the average interest refund was $124, with the average redraw balance being reduced by $264.
However, the bank had identified 131 customers whose balances will need to be adjusted down by more than $10,000 each. It said those cases are complicated and will require time to fix.
It added that the vast majority of the 200,000 affected redraw balances are home loans and personal loans. A tiny number are business loans.
As reported by the Australian Financial Review on Tuesday, ANZ has been sending letters to customers to inform them of their revised redraw balances and the date when the adjustments will kick in.
“It is possible that if you redraw greater than the estimated revised redraw balance, your loan may go into arrears and ANZ may require any amounts drawn above this figure to be repaid,” the letter said, according to the newspaper.
ANZ error follows ME Bank redraw outrage
News of ANZ’s redraw error comes after ME Bank outraged its customers earlier this year by changing the rules of its redraw facility without warning its customers first.
A redraw facility allows customers to make extra mortgage repayments on top of their required minimum repayments that can then be counted towards an “available re-draw” which can be drawn on during emergencies to pay for things such as home repairs or bills.
In April, some customers of ME Bank – which is owned by 26 industry super funds – were told they could no longer access a portion of their redraw balances because the bank had determined they could fall behind on their home loan schedules if the available redraw amount was not reduced.
One customer of ME Bank told Nine Newspapers, which first reported the story, that the bank had removed $24,000 from her redraw facility and transferred it to her home loan balance without notice, even though most of her home loan had already been paid.
The move sparked outrage, with the Australian Prudential Regulation Authority asking the bank to explain itself.
Jamie McPhee, ME Bank’s chief executive, ended up stepping down from the bank in July after more than a decade in the role.