National Australia Bank faces $2.1 million fine over improper charges
Australia's second-largest lender, National Australia Bank (OTC:NABZY) (ASX:NAB), was handed a A$2.1 million penalty by the Federal Court on Friday for improperly charging consumers recurring payment fees. The bank was found to have wrongfully charged payment fees on 74,593 occasions, amounting to A$139,845, according to the Australian Securities&Investments Commission (ASIC).
The ASIC stated that NAB continued to charge its consumers periodic payment fees for transferring money despite knowing it had no legal right to do so under their contracts. "If systems have let customers down, we expect all financial institutions, especially our banks, to act quickly to reduce consumer harm," said ASIC Deputy Chair Sarah Court.
The Federal Court's Justice Roger Derrington pointed out that NAB had prioritized its commercial interests over its obligations to its clients for over 18 months. He added that the bank has repeatedly violated financial services legislation and seemed to place a low priority on respecting the legal rights of its customers.
The court case relates to fees that NAB charged between January 2017 and July 2018. The fees totalled A$139,845 and affected 2,888 personal banking customers and 513 business banking customers. These fees were called periodic payment fees and were applied when customers made payments to other accounts.
In his judgement, Justice Derrington criticized NAB's corporate culture that placed a low priority on the observance of the law and respect for its customers' legal rights. He also noted that the A$2.1 million fine was "woefully insufficient in the circumstances".
NAB expressed regret over the unauthorized fees and announced an A$8.3 million remediation program. "We acknowledge some customers were incorrectly charged for periodical payment fees several years ago," a spokesman said.
Despite this, NAB's share price dipped 0.6% to A$28.57 on Friday amid the Federal Court ruling of "unconscionable conduct" after the bank knowingly charged customers erroneous fees. According to the ASIC, NAB could have been found liable for a penalty for each of the 74,593 incorrect fees, a maximum penalty of around A$130 billion, but for now, NAB has only been penalised for a single violation.
ASIC also indicated that NAB has already paid approximately A$9 million in remediation to customers incorrectly charged periodic payment fees from August 1, 2001. The bank stopped charging periodic payment fees in February 2019.
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