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17-444MR NAB refunds $1.7 million for overcharging interest on home loans
National Australia Bank Limited (NAB) has refunded $1.7 million to 966 home loan customers after it failed to properly set up mortgage offset accounts.
Following customer complaints, NAB conducted an internal review which found that between April 2010 and August 2017 it had not linked some offset accounts to broker originated loans. This resulted in those customers overpaying interest on their home loan.
NAB has refunded affected customers so that they are only charged interest that would have been payable had the mortgage offset account been properly linked from the commencement of the home loan.
'Consumers should be confident that when they sign up for a home loan they are receiving all of the benefits that are being promoted,' Acting ASIC Chair Peter Kell said.
'Where there are errors there should be timely and appropriate action to ensure that consumers are not any worse off as a result of the mistake.'
NAB reported the issue to ASIC. NAB has also engaged PwC to review the remediation approach and to ensure NAB's compliance systems will prevent a similar error from occurring in future.
NAB has commenced contacting and refunding affected customers. Customers who have any questions about their accounts should contact NAB on 1800 152 015.
An offset account is a savings or transaction account that is linked to a home loan account. Any money in the offset account reduces the amount of interest payable on the linked home loan. For example, if the outstanding balance on the home loan is $300,000 and there are savings of $50,000 in the offset account, then interest is only payable on the difference ($250,000).
In this case, NAB failed to link some offset accounts to home loan accounts, which meant that money held in those offset accounts did not reduce the interest payable on the home loan accounts. As a result, consumers paid more in interest than was required.
NAB also conducted a broader investigation which found that the issue only applies to broker originated loans.
NAB will also remediate customers who had an offset account during the relevant period but had repaid their home loan before 2017.
For more information about choosing the right home loan, refer to ASIC's MoneySmart website.
ASIC's MoneySmart website has information to help consumers make a complaint about financial products and services, including sample emails and letters.
Editor's note 1:
In May 2019, NAB reported it had identified another 4,930 customers requiring remediation.
In total, 6,522 customers have been impacted with refunds payable totalling over $8 million.
NAB has not been able to reach 567 customers for total refunds payable of $593,546. Where the refund is less than $500, NAB will pay these amounts to the NAB Foundation. Where the refund is $500 or more, NAB will hold on to these amounts for a period of seven years before handing it over to ASIC as part of unclaimed money. In the event that a customer contacts NAB about this refund, NAB will honour all refunds or direct the customer to unclaimed money.
Customers who have any questions about their accounts should contact NAB on 1800 152 015.