“Unconscionable conduct”: ASIC fines National Australia Bank $2.1m for overcharging customers

Rick Steves

NAB faces a $2.1 million penalty for unconscionable conduct, as the Federal Court rules the bank knowingly overcharged customers, and took over two years to rectify the situation.

National Australia Bank

The Federal Court has issued a stern ruling against National Australia Bank Ltd (NAB), ordering the financial institution to pay a $2.1 million penalty for engaging in “unconscionable conduct”.

The verdict comes as a result of NAB’s persistent charging of periodic payment fees, even though it was well aware of the wrongful overcharging of its customers.

The Australian Securities and Investments Commission (ASIC) has taken a tough stance against NAB’s actions, emphasizing the importance of financial institutions acting swiftly to rectify such issues to prevent consumer harm.

74,000+ instances of wrongful charging

Between January 2017 and July 2018, NAB was found guilty of unconscionable conduct by continuously imposing periodic payment fees, despite having no contractual entitlement to do so. This reprehensible behavior impacted 2,888 personal banking customers and 513 business banking customers, resulting in over 74,000 instances of wrongful charging. In total, NAB levied fees amounting to $139,845 during this period.

Justice Derrington, who presided over the case, minced no words in his assessment of NAB’s actions. He highlighted that the bank had “unjustifiably advanced its self-interest” while its customers remained oblivious to the wrongful charges.

NAB was fully aware of the situation but allowed the overcharging to persist while ostensibly searching for a solution. This moral dereliction, Justice Derrington suggested, could stem from a corporate culture that places a low priority on adhering to the law and respecting customers’ legal rights.

$2.1 million is the maximum penalty, but “insufficient given the magnitude”

The penalty imposed on NAB amounts to $2.1 million, the maximum allowable for the single contravention in this case. Justice Derrington acknowledged that this penalty was, in many ways, insufficient given the magnitude of the wrongdoing. However, he noted that legislative changes have since permitted substantially higher penalties. The unconscionable conduct occurred between July 20, 2007, and February 22, 2019.

In addition to the $2.1 million penalty, NAB has already paid approximately $9 million in remediation to customers affected by the incorrect periodic payment fees, which were in place from August 1, 2001. This step is part of the bank’s efforts to rectify its past misconduct and compensate customers who were adversely affected.

As part of the court’s ruling, NAB has been ordered to publish an adverse publicity notice on its website. Moreover, the bank is responsible for covering ASIC’s costs associated with the case.

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