Borrow
Royal redraw screw-up sees bank apologise
A non-major bank has been backpedalling since it was revealed that it had reduced the amount borrowers could redraw from some of its mortgage products without letting customers know.
Royal redraw screw-up sees bank apologise
A non-major bank has been backpedalling since it was revealed that it had reduced the amount borrowers could redraw from some of its mortgage products without letting customers know.
Over the weekend, it was revealed that super fund-backed ME Bank had quietly made changes to the amount of money customers were able to redraw from certain legacy home loans.
While no money was removed from the accounts of affected individuals, it caused widespread concern for many of the bank’s customers, as was reported by nestegg’s sister brand The Adviser, which revealed many customers had taken to social media to lambast the changes which were made without proper notice.
For some customers, “the change has reportedly meant that they are unable to access money that they had hoped to later withdraw – in some cases thought to be tens of thousands of dollars”.
ME Bank’s terms and conditions are set out in such a way that only requires them to notify customers of changes to a loan’s terms and conditions where it reduces a borrower’s obligation when they are sent the next account statement following the change.
According to the bank’s CEO, Jamie McPhee, the adjustment was only required for legacy home loans that were written more than five years ago.
ME Bank has asserted that the redraw limit adjustment “was made with the best of intentions – to protect some customers from the risk of redrawing too much money, which could have inadvertently put them behind their repayment schedule”.
It has revealed that analysis showed a group of customers on one of the bank’s older home loan product were at risk of going above their scheduled home loan balance if they activated the full redraw facility.
ME Bank said this would have left customers open to paying additional interest, being at risk of not meeting their scheduled repayments, and hardship at the end of the loan.
At the same time, Mr McPhee conceded: “We messed up”.
“Customers do need to be protected from unexpected increases to their home loan repayments. But the way we put those protections in place was clearly not good enough,” he outlined.
“We should have worked harder to explain a complex product and process simply so that redraw limits were better understood.”
Arguing that the bank never benefited from this decision, Mr McPhee said that to make things right, every affected redraw customer will now be eligible for an assistance package, which will include a discussion around that individual’s redraw and personal needs.
ME Bank has said that it is in the process of reviewing the personal circumstances of anyone affected, and is offering options that include the rearranging of financing at the Bank’s costs, and the offering up of three- and six-month repayment holidays.
Other measures available include the extension of additional credit, the topping up of loans, and an extension of the term of loans.
Highlighting it as a priority to “fix this situation”, the CEO also quelled rumours about any other motive for the adjustment – and the lack of communication on the issue – as being “simply untrue”.
“The bank is in a strong financial position and our capital and liquidity levels are well above both internal targets and regulatory requirements,” he concluded.
About the author
About the author
Banking
Banks report $14.4bn profit amid pressure on net interest margins
Australia’s major banks have reported a significant boost to their bottom lines and returns in the first half of the 2022 financial year, signaling sector-wide resilience despite persistent pressure...Read more
Banking
Major banks report rising profits
NAB and ANZ announced their half-year results this week. ...Read more
Banking
Modernisation of direct debit system suffers setback
According to the Reserve Bank (RBA), several major banks will not be able to meet the current timeline for the launch of the PayTo service. ...Read more
Banking
Australians' trust in digital providers has decreased in last five years
Australians have little trust in organisations keeping their information secure, but the financial services industry still sits atop the list. ...Read more
Banking
Commonwealth Bank chairman to retire in August
The Commonwealth Bank (CBA) board has announced a successor. ...Read more
Banking
Westpac responds to $113m penalty
The big four bank has responded to the penalty handed down last week. ...Read more
Banking
Westpac ordered to pay $113m for ‘widespread compliance failures’
Westpac has been ordered to pay penalties in the amount of $113 million for widespread compliance failures across multiple businesses, including Westpac’s banking, superannuation, wealth management ...Read more
Banking
Big bank-backed start-up raises $12.75m
A landmark fundraise by Australia’s biggest banks has secured a war chest of $12.75 million to the sector’s blockchain consortium, Lygon, to bolster its research and development into helping banks...Read more
Wrapping up an eventful 2021
Listen now
What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now
Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now
Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now
Banking
Banks report $14.4bn profit amid pressure on net interest margins
Australia’s major banks have reported a significant boost to their bottom lines and returns in the first half of the 2022 financial year, signaling sector-wide resilience despite persistent pressure...Read more
Banking
Major banks report rising profits
NAB and ANZ announced their half-year results this week. ...Read more
Banking
Modernisation of direct debit system suffers setback
According to the Reserve Bank (RBA), several major banks will not be able to meet the current timeline for the launch of the PayTo service. ...Read more
Banking
Australians' trust in digital providers has decreased in last five years
Australians have little trust in organisations keeping their information secure, but the financial services industry still sits atop the list. ...Read more
Banking
Commonwealth Bank chairman to retire in August
The Commonwealth Bank (CBA) board has announced a successor. ...Read more
Banking
Westpac responds to $113m penalty
The big four bank has responded to the penalty handed down last week. ...Read more
Banking
Westpac ordered to pay $113m for ‘widespread compliance failures’
Westpac has been ordered to pay penalties in the amount of $113 million for widespread compliance failures across multiple businesses, including Westpac’s banking, superannuation, wealth management ...Read more
Banking
Big bank-backed start-up raises $12.75m
A landmark fundraise by Australia’s biggest banks has secured a war chest of $12.75 million to the sector’s blockchain consortium, Lygon, to bolster its research and development into helping banks...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
