NAB fined $2.1m for unconscionable conduct

On Friday, the Federal Court ordered NAB to pay a $2.1 million penalty for continuing to charge periodic payment fees despite knowing that it was wrongfully overcharging its customers.

The court found that, between January 2017 and July 2018, NAB engaged in unconscionable conduct by continuing to charge fees when it knew it had no contractual entitlement to do so.

The big four bank wrongfully charged periodic payment fees on 74,593 occasions totalling $139,845 to 2,888 of its personal banking customers and 513 business banking customers.

“NAB continued to charge fees when it knew it lacked any entitlement to do so and omitted to tell its customers of that wrongful charging. It took NAB over two years to stop charging these incorrect fees, which was clearly unacceptable,” said Australian Securities and Investments Commission (ASIC) deputy chair Sarah Court.

“The court concluded that the central cause of NAB’s wrongful charging was the bank’s inability to manage its own computer systems and its unwillingness to apply sufficient resources to remedy the problem in a timely manner.”

Justice Derrington found that NAB “unjustifiably advanced its self-interest while knowing that its customers were oblivious to the wrongful charging that was taking place”.

“It deliberately and cynically took advantage of its customers’ unawareness and was prepared to allow the overcharging to continue whilst it searched, admittedly in good faith, but without any great diligence, for a solution,” Justice Derrington said.

“Such moral dereliction would seem to reflect an inherent sense of entitlement, possibly precipitated by a view that no real harm would come to the bank even if its conduct was detected. It is, perhaps, also a product of a corporate culture that places a low priority on the observance of the law and on respect for its customers’ legal rights.”

In imposing the $2.1 million penalty, Justice Derrington said that while the maximum penalty for the single contravention had been applied, this was “without question, woefully insufficient in the circumstances”.

“However, some solace can be taken in the fact that, in the time that has passed since the contravening conduct in this case occurred, the relevant provisions of the ASIC Act have been updated to permit the imposition of a substantially higher penalty,” Justice Derrington added.

The penalty for unconscionable conduct in breach of the ASIC Act, for conduct that occurred after March 2019, is now at least $15.65 million.

In addition to its $2.1 million penalty, NAB has paid approximately $9 million in remediation to affected customers who incurred incorrect periodic payment fees from August 2001. The bank was also ordered to publish an adverse publicity notice on its website and pay ASIC’s costs.

“An unconscionable conduct ruling, penalty and resulting remediation program demonstrates the consequences that come from not resolving an issue in a timely way,” Ms Court said.

“If systems have let customers down, we expect all financial institutions, especially our banks, to act quickly to reduce consumer harm.”

NAB stopped charging periodic payment fees to its customers on 22 February 2019.

In a statement provided to ifa, a NAB spokesperson said: “We acknowledge some customers were incorrectly charged for periodical payment fees several years ago. This issue related to the incorrect selection of a fee by NAB when setting up a payment arrangement within personal and business banking accounts.

“We apologise to all impacted customers. We have completed a remediation program to set things right and repaid more than $8.3 million of fees plus interest to affected customers.”