The Federal Court of Australia has ordered the Commonwealth Bank of Australia (CBA) to pay a $7 million penalty after declaring the bank guilty of making false or misleading representations and engaging in misleading and deceptive conduct.
These declarations related to 12,119 occasions when CBA charged a rate of interest on business overdraft accounts substantially higher than what its customers had been advised.
The rate, which customers were advised would be 16 per cent per annum in most cases, was said to rocket to around 34 per cent per annum.
In reaching the penalty decision, Justice Lee found that CBA’s conduct was serious, that the number of false and misleading representations was significant, and that conduct of this type and nature must be prevented.
And while CBA admitted to charging more than 1,510 customers a different and higher interest rate, the court rejected the bank’s allegations that it acted expeditiously to remedy the error.
“Financial services institutions need to have appropriate systems, governance and controls in place to ensure they deliver on promises made to their customers. When CBA failed to resolve this error after it was identified, customers were overcharged more than $2 million in interest,” ASIC commissioner Sean Hughes said in a statement.
Mr Hughes, however, commended CBA for making investments in its systems as a matter of priority.
“All financial services institutions should make similar commitments to rebuild trust in our financial system and to avoid further failures,” he added.
CBA’s conduct was the subject of a case study by the Hayne royal commission.