Bank admits deliberately delaying compensating customers to avoid inquiry scrutiny

THE Commonwealth Bank deliberately delayed informing and compensating customers who had been overcharged interest because it did not want a government inquiry to know about the problem.

THE Commonwealth Bank deliberately delayed informing and compensating customers who had been overcharged interest because it did not want a government inquiry to know about the problem.

Appearing at the banking royal commission in Melbourne on Thursday, CBA retail products executive general manager Clive van Horen said the bank’s “scrum” committee had decided against reporting the overcharging to the corporate regulator in 2013 when it was first identified and again in 2015 when it was more widely known.

Mr van Horen said he now agreed that move was in breach of the Corporations Act.

The Financial Ombudsman Service wrote to the CBA, following complaints by small business customers, and advised the bank it considered the problem to be “systemic”.

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CBA retail products executive general manager Clive van Horen outside the hearing. Picture: David Geraghty

However, the CBA still did not report it to the Australian Securities and Investments Commission until this month, — on the eve of giving evidence before the royal commission.

Mr van Horen conceded the bank delayed and downplayed the problem to avoid bad publicity rather than acting in the best interest of its customers.

The commission heard CBA small-business overdraft clients were charged more than double the correct interest rate and the number of affected customers was deliberately obscured. In documents tabled at the hearing, Mr van Horen asked staff to delay sending out letters to customers and compensation payments so a government inquiry would not know about the issue.

“Can we make all this happen, letters and actual refunds, after house of reps hearing 11 March. Eliminates this being brought up in the hearings and delay of 10 days is immaterial,” the internal CBA email from Mr van Horen read.

Former CBA chief Ian Narev. Picture: James Croucher

In response to questions from commissioner Kenneth Hayne about the decision to delay the compensation payments until after the hearings, Mr van Horen said: “I think it was a poor judgment on my part.”

The House of Representative hearings were to question bank chief executives, including former CBA chief Ian Narev, about misconduct in the industry. The CBA said it had overcharged about 2800 business-overdraft customers.

They were charged interest rates of 34 per cent, compared with the correct rate of 16 per cent. It took the CBA an average of 960 days from the time the overcharging was first complained about until it compensated customers. Total compensation was $3 million.

Mr van Horen also gave evidence that one customer had a debt of $3493 waived “as a commercial decision to resolve the matter” after the customer threatened to report the overcharging to the media.