The Australian Securities and Exchange Commission has charged National Australia Bank (NAB) with unconscionable conduct and misrepresentations over account fees which occurred between 2015 and 2019.
ASIC alleged that NAB charged fees to 4,874 personal accounts and 913 business customers for periodic payments on at least 195,305 occasions totaling $365,454 when it was not contractually entitled to do so. For that, the regulator states that NAB:
made false or misleading representations that it was contractually entitled to charge the fees when it was not;
engaged in misleading or deceptive conduct; and
contravened its obligation as an Australian financial services licensee to comply with financial services laws.
NAB identified the error by the end of 2016, but only notified and compensated customers in mid-2018. The regulator adds NAB kept charging the fees between at least January 2017 and July 2018, even though it knew overcharging was occurring and did not have systems to prevent those fees from being charged incorrectly.
Between at least 20 July 2007 and 22 February 2019, the bank was officially charging $1.80 for periodic payments to other accounts within NAB and $5.30 for periodic payments to accounts at another bank. Exemptions to that policy included payments to NAB home loans, NAB personal loans, certain NAB savings accounts, and certain NAB service packages.
NAB’s legacy systems, which included the bank’s staff being required to manually enter details of the periodic payment into NAB’s system when setting up the payment, resulted in wrongly charged fees.
According to Australia’s financial watchdog, NAB has paid or intends to pay, remediation of approximately $7.7 million to customers who were overcharged from August 2001.
The episode described above is a perfect example of how maintaining legacy systems can take its toll. Not only are they more prone to errors, but they also keep staff from doing productive work. This can reflect in lower customer retention rates and, in the case of NAB, fines for unconscionable conduct and misrepresentations over account fees.
From a total of $365,454 in wrongly charged fees, National Australia Bank will have to disburse $7.7 million.