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ANZ admits mortgage remediation was ‘not good enough’

by Reporter12 minute read
anz logo building people walking anz mortgage remediation not good enough financial services royal commission decade to refund

The financial services royal commission has placed ANZ’s remediation program under intense scrutiny, after the bank was found to have taken a decade to refund customers that were overcharged interest on their home loans.

ANZ’s head of home loan products, Sarah Stubbings, appeared before the commission on Tuesday (20 March) and was examined regarding the major bank’s remediation practices.

The commission heard that:

  • between 2006 and July 2013, certain Breakfree home loan customers were charged higher interest rates than the package’s terms and conditions specified;
  • between 2003 and December 2012, some offset accounts were not properly linked to home loans, resulting in customers being charged excess interest;
  • in a period of six months in 2015, certain customers did not receive the correct interest rate margin on their home loan;
  • between 14 December 2012 and February 2016, approximately 4,800 offset accounts had not been linked to an eligible retail home loan; and
  • some home loan and commercial lending accounts were not receiving the full benefit of offset arrangements due to the way the offset sub-system calculates interest as compared to the loan sub-system.

It was revealed during the hearing that affected customers were not refunded by the lender for up to 10 years after such errors were identified.


Counsel assisting the commission Albert Dinelli put it to the Ms Stubbings that the lender’s processes were “not good enough”.

“That’s not good enough, is it? To have an issue that is resolved after that period of time for customers?” Mr Dinelli said.

Ms Stubbings agreed that ANZ’s response “took too long”, but she argued that, at the time, ANZ was inexperienced at dealing with such issues.

“My view was that the remediation process did take too long,” the executive said. “We had not done anything of that nature before.”

She continued: “It was the first time we’d done something like that, and it took us longer because we were learning, and we didn’t have things in place like remediation frameworks or remediation principles.”

Further, Ms Stubbings was questioned over an internal report released by ANZ in April 2014 in which the bank weighed its options concerning customer remediation.

The bank considered whether to “stagger payments to lessen the business impact” or “refund all customers once payments commence”.

Mr Dinelli accused the bank of acting in favour of its images rather than in the interest of customers.

“If it was the case that it was being delayed by reference to the business impact of ANZ, that wouldn’t be good enough, would it?” Mr Dinelli said. “That wouldn’t be in the interest of customers, and it certainly wouldn’t be in line with community expectations, would it?”

Ms Stubbings agreed but noted that she wasn’t present in her current role at the time, and she could not explain why the bank chose to consider remediation in such a way.

The way in which banks have acted following discovery of errors, misconduct and systematic failures has been of great focus in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

On Monday, the commission accused ANZ of failing to comply with its responsible lending obligations by failing to verify expenses when determining whether a borrower can service their loan, while CBA was interrogated by the financial services royal commission for its tardy reporting of issues concerning its mis-selling of home loan insurance.

The Commonwealth Bank’s (CBA) executive general manager of retail products, Clive van Horen, fronted the commission on Monday (19 March) to address questions regarding the bank’s reporting of errors found in its selling of loan protection products (LPP).

In October 2015, CBA made changes to its LPP application process, after discovering that a lack of disclosure surrounding eligibility criteria, which prevented credit card insurance (CCI) customers from claiming on the insurance, was also evident in its Home Loan Protection (HLP) and Personal Loan Protection (PLP) products.

However, it was revealed that the major bank only reported the issue to the Australian Securities and Investments Commission (ASIC) in 2017, two years after the errors were discovered.

Commissioner Kenneth Hayne put it to Mr van Horen that “CBA swept the problem aside in the hope it would go away”.

What do you think about the major banks? The last 12 months have been challenging for the big banks. Rising funding costs have continued to pressure margins, leading to pricing changes towards the end of 2017. Meanwhile, regulatory measures and higher capital requirements are forcing the big four to tweak their policies. 

Which lenders have continued to deliver excellent product and service, and which lenders have communicated the myriad changes best?

This is your chance to let us know what you really think in the 
Third-Party Lending Report – Major Banks survey for 2018. 

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