Senate launches inquiry into bank offset failures, ASIC flaws

The regulator found accounts were frequently not established, linked or overseen correctly, potentially leaving borrowers to pay more interest than they should have.

ASIC said banks had paid more than $55 million in compensation for offset-account failures identified in reports spanning 1 September 2023 to 31 August 2025.

The committee is due to report by 7 June 2027.

Bragg said the inquiry would test whether the banking sector and the corporate regulator had responded sufficiently to what he characterised as a serious consumer issue.

“That is really the heart of this issue that we want to pursue, because it’s not good enough for a major scandal like this to be unearthed by the financial regulators and for that to be the end of it,” Bragg said.

Bank chiefs in the spotlight

Bragg said major lenders should be required to account for failures affecting mortgage customers.

Referring to the banking sector’s profitability and policy settings, the senator said: “so, it is reasonable that the CEOs of these banks should be required to explain how it’s happened that people’s mortgage offset accounts fell apart.”

The inquiry will consider the costs and benefits of offset accounts, as well as the processes used to identify errors, remedy failures and compensate affected customers.

It will also examine the impact of failures on interest costs and repayments.

“The major banks are not above reproach. We expect to hear from their top brass. Australians should not be left paying more interest because an offset account was not properly established, linked or managed,” Bragg outlined.

ASIC’s enforcement record challenged

While ASIC’s review supplied the evidence behind the inquiry, Bragg argued that publishing findings and facilitating compensation did not answer the broader question of regulatory deterrence.

“There have been terrible consequences for people when things happened, but what we don’t see is prosecutions, incarceration or fines which are big enough to be more substantial than just speeding tickets for these institutions,” Bragg said.

The senator also pointed to a claimed decline in ASIC referrals to the Director of Public Prosecutions, arguing that a fall in referrals cannot reasonably be attributed to the disappearance of financial crime.

“I don’t think you can seriously argue, when you look at the DPP figures and the number of referrals, where referrals from ASIC have almost halved over the past half decade, that the corporate cop is doing the work it should be doing,” Bragg said.

“There is no way that white collar crime in Australia has just gone away.”

Bragg drew on the collapses of First Guardian, Shield and Lion to argue that regulators must move faster when credible warnings arise.

“In the last parliament and a half we’ve seen the First Guardian, Shield and Lion collapses. All these people who have lost significant sums of money, often through fraud, thought they were living in a country where the rule of law would be strongly enforced and the regulator would come in quickly and act,” he said.

He further alleged that ASIC had, in past matters, failed to respond promptly to written warnings about suspected unlicensed financial services activity.

Bragg acknowledged ASIC’s research into mortgage offsets had value, but said it needed to be accompanied by stronger consequences where consumer interests had been significantly damaged.

“It’s all well and good for the corporate cop to go and do research into offset accounts and put out papers and the like. That’s helpful,” he noted.

“But what really matters is establishing a precedent where, if you break the law and you damage consumer interests significantly, then you will be facing serious penalties – the executives of the banks will be facing penalties. That is not the situation we have today.”

[Related: Broker associations press Senate to improve mortgage market barriers]