Westpac has been forced to compensate around 40,000 customers who have been overcharged on their mortgage repayments, in the latest fallout from last year’s banking Royal Commission.
Australia’s second biggest bank is on track to paying close to a $100 million after discovering the customers had been charged too much when their loans switched off “interest-only” payments.
The bank blamed manual processing errors, which left a large portion of borrowers on the interest-only loans instead of being transferred to principal and interest once the interest-only period had expired.
The bank has been in touch with customers, sending letters explaining how the 40,000 will be remediated for paying excess interest. A further 30,000 who were ahead of their mortgage repayments suffered no financial impact and will not be remediated.
About 70 per cent of customers have now been remediated with those linked to some of the bank’s subsidiaries impacted, including BankSA, Bank of Melbourne and St George.
“As part of this, we identified a mortgage processing error, which led to customers continuing to make interest only repayments on their mortgage instead of being switched to principal and interest repayments at the end of their interest-only period,” a bank spokesperson said in a statement.
“Westpac issued an external media release in late 2017 outlining this matter.”
The issue was first identified in 2017 after a random review of its products and services.
Customers who have been affected will either be paid back through their mortgages or sent a cheque, but for the period they were left on interest-only repayments a customer wasn’t able to make inroads into their mortgage.
This could leave the possibility of some customers applying for an extension on their loan.
Customers affected were mainly those with an interest-only period that expired between 2009 and 2016.
“After identifying this issue, we have conducted a full review of the matter,” the bank’s spokesperson said.
Westpac says impacted customers can contact their specialist bankers on 1300 132 925 8am-8pm Monday to Friday and 9am-5.30pm Saturday (AEST).