Members Equity Bank Limited (ME Bank) has been ordered by the Federal Court to pay a penalty of $820,000 after pleading guilty to criminal charges of making false and misleading representations and failing to provide required written notices regarding home loans.
Between 25 May 2018 and 3 September 2018, ME Bank sent 589 letters to home loan customers informing them of incorrect minimum repayment amounts to be paid after the expiry of either a fixed-rate or interest-only period. Each of the letters contained a repayment amount that was less than the actual amount required to repay the loan.
Between 28 December 2016 and 23 February 2018, ME Bank also failed to send letters to some customers to inform them that the interest rate and minimum repayment amount was changing after the expiry of an interest-only or fixed-rate period.
ASIC Executive Director for Enforcement & Compliance, Tim Mullaly said, ‘This misconduct arose from ME Bank failing to send accurate home loan information to its customers. Banks are expected to properly notify and update customers who are entitled under the law to receive accurate information about changes to their loans. Where banks fail to meet these requirements, they can face criminal convictions.’
The penalty was comprised of $750,000 for the charge under the ASIC Act, and $70,000 for charges under the National Credit Code (as set out in the National Consumer Credit Protection Act 2009).
ME Bank pleaded guilty to charges of:
making false and misleading representations in letters to its home loan customers, in contravention of sections 12DB(1)(g) and 12GB(1) of the Australian Securities and Investments Commission Act 2001; and
failing to provide written notice about annual interest rate and repayment amount changes, in contravention of ss 64(1) and 65(1) of the National Credit Code.
The matter was prosecuted by the Commonwealth Director of Public Prosecutions following an investigation and referral by ASIC. Impacted customers have been remediated by ME Bank.