Industry Super, ME Bank summoned for parliamentary probe

The House of Representatives standing committee on economics has scheduled the public hearing by videoconference on Thursday, as part of its ongoing review into the big four banks and other financial institutions. 

The body and industry fund-owned Members Equity Bank have been subject to scrutiny in light of COVID-19-related measures. 

Industry Super will face questions around its funds’ liquidity, since the commencement of the early release mechanism allowing members in financial distress to withdraw up to $20,000.

The body has also copped heat from the government around its modelling for its online comparison tools, where it was said to inflate the effect of the early release scheme to consumers.

Standing committee of economics chair Tim Wilson stated the COVID-19 pandemic had raised a number of issues around how the banking and super sectors would support consumers. 

“Australians trust superannuation funds with significant savings, they hold a fair expectation that funds will provide accurate information and will act promptly if they are eligible for early withdrawal,” Mr Wilson said. 

“The conduct of Industry Super Australia in publishing dubious calculations about the impacts of early withdrawal will be examined, as will processes to stop fraud.”

The Australian Federal Police commissioner reported last week the organisation is looking into fraud committed through the early release scheme, where up to 150 super members had $10,000 docked from their accounts. 

“Members’ equity should be paramount, and concerns about liquidity also need to be answered,” Mr Wilson commented. 

“It was only in November last year that the sector dismissed this committee’s concerns about liquidity prompted by substantial investments by funds in illiquid assets. 

“As the superannuation sector is a significant mechanism enabling Australians to support themselves in retirement, it is crucial that the superannuation sector is operating effectively, fairly and for the benefit of fund members.”

Meanwhile, ME Bank recently was slammed for changing redraw minimums on home loans without properly notifying customers.

The redraw facility allows customers to deposit money ahead of their loan repayment schedule, with the cash also then being able to be withdrawn. 

But the bank decided to reduce redraw limits, reporting the product could lead to some consumers falling behind on paying their home loan. A public outcry ensued, with many saying customers were having their access to cash minimised when they may need it most.

Liberal senator Andrew Bragg speculated industry super funds had an ulterior motive behind the bank’s movement. 

“Super funds strike again: perhaps they didn’t tune into the banking royal commission. Much better behaviour is needed during a pandemic,” the senator tweeted. 

After copping negative coverage, the bank issued a statement on Friday saying it would change back its home loan redraw limits for customers who wanted it. ME Bank said 4 per cent of its customers were affected.

Jamie McPhee, chief executive of ME Bank apologised, commenting: “We are deeply sorry; we were trying to do the right thing but we went about it the wrong way.

“I would like to reassure customers that at no point did the bank ‘remove funds from customer accounts’ or ‘transfer’ any customer funds. Nor was the adjustment made for liquidity reasons.”

Mr Wilson said the bank’s conduct had raised “urgent questions” around the security and flexibility of its mortgage products. 

“Australians who put their savings into the bank or entrust it with a superannuation fund rightly expect it to be secure,” he said.