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The bank failed to remedy incorrect periodic payment fees for more than two years.
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NAB overcharging unconscionable: federal court
08 November 2022
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10 minute read
The Federal Court has found that National Australia Bank engaged in unconscionable conduct by knowingly overcharging customers periodic payment fees for four years.
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More than 5,000 personal and business customers paid a total of $365,454 in periodic payment fees from February 2015 and February 2019 despite NAB being aware that they were entitled to an exemption or a lower fee.
ASIC, which pursued the case, said it took NAB more than two years to switch off the periodic payment fees after becoming aware of the issue.
“The continued charging of incorrect fees to customers when NAB knew it was occurring was concerning as it demonstrated that NAB was promoting its own interests over those of its customers,” ASIC deputy chair Sarah Court said.
The court upheld ASIC’s allegations. Justice Roger Derrington said NAB “took advantage of the customers’ continuing lack of knowledge and acted in its own self-interest by continuing to operate a system which it knew wrongfully deducted sums from its customers’ accounts”.
“This conduct fell so far below the standards required of a bank’s obligations to its customers that it was unconscionable,” he said. “It was neither proper nor right according to ordinary commercial values in Australian society, and it was offensive to conscience.
“Once it [NAB] was aware that its systems were wrongly charging PP (Periodic Payment) fees to some clients who had no obligation to pay them, it was neither competent nor ethical to continue to charge them and to fail to inform them or advise them to review their accounts. Neither could it be said to be fair or honest.
“Compliance would require suitable remedial action to be undertaken with appropriate urgency once aware of the wrong it had done.”
The case involved 4,874 personal banking and 913 business banking customers who were charged periodic payment fees of $1.80 or $5.30 when they were entitled to an exemption, or $5.30 when the correct fee was $1.80.
NAB ceased charging all periodic payment fees to customers on 22 February 2019 and as at 28 April 2021, NAB had paid approximately $8.3 million in remediation to affected customers dating back to 1 August 2001.
The court found that NAB’s unconscionable conduct contravened its obligations as an Australian financial services licensee to ensure that financial services covered by its licence were provided efficiently, honestly and fairly, and to comply with the financial services laws. However, Justice Derrington declined to make declarations of contravention on the basis that the conduct was the same.
The matter will be listed for a hearing on the scope of any further relief, including penalties, on a date to be fixed.
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