NAB customers to receive compensation for being overcharged interest on home loans

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National Australia Bank
A National Australia Bank (NAB) logo is pictured on an automated teller machine (ATM) in central Sydney September 12, 2014. Reuters/David Gray

The National Australia Bank is contacting some customers to refund excess interest. Almost $2 million will be refunded by the bank to its customers who were overcharged interest for more than seven years. This is specifically for those on home loans.

Customers paid excess interest when the bank was not able to set up mortgage offset accounts appropriately. Up to 966 NAB customers will receive compensation of $1.7 million.

There have been customer complaints, prompting the bank to conduct an investigation. This has been confirmed by the Australian Securities and Investments Commission (ASIC).

The NAB began an internal review in February and engaged PwC to assist in the review of its compliance systems. It has been determined that between April 2010 and August 2017, the bank had failed to link some offset accounts to loans set up by mortgage brokers. This meant some customers paid too much interest on their mortgage.

NAB’s goal is for customers to be charged interest that would have been payable had the mortgage offset account been correctly linked to the home loan. Meg Bonighton, the bank’s general manager for home lending, admitted that the issue was a mistake.

"We sincerely apologise to our customers for this, which was due to administration errors," the ABC reports Bonighton as saying. She said the bank alerted the ASIC regarding the matter earlier this year. Impacted customers represented less than 1 percent of mortgage offset accounts set up by mortgage brokers since 2010, Bonighton added.

The bank has implemented measures to improve offset origination processes over the past 12 months. The customers’ ability to look into their offset arrangements themselves was also enhanced.

It was not the first time a similar error has been made. In February, Commonwealth Bank's Bankwest division refunded $4.9 million to thousands of customers after the same issue.

Westpac has recently announced it would repay $11 million to mortgage holders because of a systems error affecting some loans. The bank reportedly failed to switch the owner-occupiers to principal and interest mortgages.

Meanwhile, ASIC acting chairman Peter Kell released a statement on Tuesday, saying consumers must be confident that they are receiving all advertised benefits when they sign up for a home loan. "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,” he said, according to the Sydney Morning Herald.

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