National Australia Bank fined $2.1 million for wrongfully overcharging customers over 18-month period

National Australia Bank (NAB) has been ordered to pay a $2.1 million penalty for “unconscionable conduct” against its customers.

The bank, Australia’s second-biggest lender, was fined for wrongfully charging its customers periodic payment fees on more than 74,000 occasions, even when it knew it was wrongfully overcharging them.

The Federal Court found that between January 2017 and July 2018, NAB wrongfully charged $139,845 worth periodic payment fees on 74,593 occasions on 2888 personal banking and 513 business banking customers.

The fees were incorrectly charged dating back to 2007, but Federal Court Justice Roger Derrington wrote that NAB became aware of them in late 2016.

Justice Derrington wrote in an order on Friday that NAB “unjustifiably advanced its self interest” by continuing to charge its customers, who were “oblivious” to what 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,” he wrote.

The issue reportedly stemmed from human error when the automated payments were set up by NAB staff.

Between at least July 20, 2007 and February 22, 2019, NAB’s terms and conditions stated the bank would charge $1.80 for periodic payments to other accounts with NAB, and $5.30 for periodic payments to accounts at another bank. Also, certain transactions were exempt from charges.

During that period, however, NAB charged customers periodic payment fees when they were entitled to exemptions; or $5.30 when the correct fee was $1.80.

Justice Derrington wrote that despite the bank setting up internal investigations into the issues and identifying the customers affected by the errant system”, it did not “remedy the system’s dysfunctionality, short of shutting it down altogether”.

NAB did so on July 2018, and eventually ceased charging all periodic payment fees to customers on February 22, 2019.

In imposing the penalty, Justice Derrington said the $2.1 million fine – the maximum possible – was “woefully inadequate” for the bank’s conduct, and was unlikely to have any real impact on its future conduct.

“In a context where NAB has been a repeat offender against the financial services legislation in this country and, as this case and others reveal, it appears to place a low priority on respecting the legal rights of its customers, a penalty several times the statutory maximum would have been far more appropriate.”

As well as the $2.1 million penalty NAB was ordered to publish a notice on its website and pay the Australian Securities and Investments Commission’s (ASIC) legal costs.

ASIC Chair Sarah Court said the result “demonstrates the consequences that come from not resolving an issue in a timely way”.

“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,” Ms Court said in a statement.

“It took NAB over two years to stop charging these incorrect fees, which was clearly unacceptable.”

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

ASIC had claimed that NAB was liable for a penalty for each of the bank’s 74,593 incorrect fees, meaning the maximum penalty could have topped $130 billion, but Justice Derrington found the bank only liable for a single violation.

NAB has already has already paid more than $8 million to affected customers who incurred incorrect payment fees from August 1, 2001.

In an email to 9News after the ruling, NAB repeated its previous apology it made in July.

“We have completed a remediation program to set things right and repaid more than $8.3 million of fees plus interest to affected customers,” the statement said

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