ASIC has commenced proceedings in the Federal Court against National Australia Bank Ltd (NAB), alleging that NAB charged fees for making certain periodic payments when it was not entitled to under the bank’s contracts with its customers.
ASIC alleges between 25 February 2015 and 22 February 2019, NAB charged fees for periodic payments on at least 195,305 occasions totalling $365,454 when it was not contractually entitled to do so. These fees were charged to 4,874 personal banking customers and 913 business banking customers.
ASIC alleges that by charging the fees, or by notifying customers of the charging of each fee via a bank statement, 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 had identified that it was charging periodic payment fees in error to both personal and business banking customers by the end of October 2016. However, it took NAB until July 2018 to lodge a breach report with ASIC and notify customers of the overcharging, and to begin remediating customers.
ASIC alleges that between at least January 2017 and July 2018, NAB continued to charge customers periodic payment fees even though it knew overcharging was occurring and did not have systems to prevent those fees from being charged incorrectly. NAB did not change its systems to prevent overcharging until 22 February 2019, when it ceased to charge those fees to customers.
ASIC alleges between January 2017 and July 2018, NAB engaged in unconscionable conduct and contravened its obligations as an Australian financial services licensee to ensure that financial services covered by its licence were provided efficiently, honestly and fairly by:
- continuing to charge periodic payment fees to customers in circumstances where it knew that it had no contractual entitlement to do so; and
- failing to inform customers about the wrongful charging of fees, or suggest that customers review the periodic payment fees charged to their accounts.
ASIC also alleges that between 25 February 2015 and 22 February 2019, NAB failed to provide financial services efficiently, honestly and fairly by:
- imposing periodic payment fees on customers when it had no contractual entitlement to do so; and
- failing to have adequate systems and processes to:
- ensure that periodic payment fee overcharging did not occur;
- detect periodic payment fee overcharging when it did occur; and
- identify and remediate affected customers.
The proceeding will be listed for a case management hearing on a date to be determined by the Court.
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Background
Between at least 20 July 2007 and 22 February 2019, NAB’s standard terms stated NAB would charge $1.80 for periodic payments to other accounts within NAB and $5.30 for periodic payments to accounts at another bank. NAB’s terms also stated that customers would be entitled to exemptions from periodic payment fees for certain transactions, such as payments to NAB home loans, NAB personal loans, certain NAB savings accounts and certain NAB service packages.
Periodic payment fee arrangements could be established by customers completing paperwork in a NAB branch. NAB staff were required to manually enter details of the periodic payment into NAB’s system when setting up the payment, which if entered incorrectly, could result in customers being wrongly charged fees. From at least 20 July 2007, NAB charged some customers a periodic payment fee of:
- $1.80 or $5.30 when they were entitled to an exemption under NAB’s standard terms; or
- $5.30 when the correct fee was $1.80.
NAB has paid, or intends to pay, remediation of approximately $7.7 million to customers who were overcharged from August 2001.
Editor's note 1:
A case management hearing has been listed before Justice Derrington for 24 March 2021.
Editor's note 2:
The case management hearing listed for 24 March 2021 has been rescheduled to 31 March 2021.
Editor's note 3:
On 26 March 2021, the case management hearing listed for 31 March 2021 was vacated, and the Court instead made timetabling orders on the papers with the consent of the parties. The matter has been listed for a case management hearing on 31 May 2021.
Editor’s note 4:
On 26 May 2021, the case management hearing listed for 31 May 2021 was vacated, and the Court instead made timetabling orders on the papers with the consent of the parties. The matter has been listed for a case management hearing on 16 September 2021.
Editor's note 5:
On 6 September 2021, the case management hearing listed for 16 September 2021 was rescheduled to 5 October 2021.
Editor's note 6:
On 1 October 2021, the case management hearing listed for 5 October 2021 was vacated, and the Court instead made timetabling orders on the papers with the consent of the parties. The matter has been listed for a case management hearing on 4 November 2021.
Editor's note 7:
On 4 November 2021, the case management hearing listed for 4 November 2021 was vacated, and the Court instead made timetabling orders on the papers with the consent of the parties. The matter has been set down for a hearing on liability commencing on 1 June 2022.
Editor's note 8:
The liability hearing was heard by Justice Derrington on 1-2 June 2022. Judgment was reserved.
Editor's note 9:
On 7 November 2022, the Federal Court found that NAB engaged in unconscionable conduct by continuing to charge customers periodic payment fees even though NAB knew the overcharging was occurring (refer: 22-304MR).
Editor's note 10:
On 22 September 2023, the Federal Court ordered that NAB pay a pecuniary penalty of $2.1 million for unconscionable conduct (23-258MR).