Commonwealth Bank taken to court for charging customers too much interest

The corporate regulator has launched legal action against the Commonwealth Bank for allegedly charging customers too much interest.

ASIC has lodged civil proceedings against CBA. Picture: Annette Dew

The corporate regulator has launched legal action against the Commonwealth Bank for alleged misleading and deceptive conduct that involved customers being charged too much interest.

On Tuesday, the Australian Securities Investment Commission lodged civil proceedings against the country’s largest bank for charging a rate of interest on business overdraft accounts that was higher than customers were advised.

The allegation is in light of evidence detailed to the banking royal commission that revealed CBA customers were slugged with higher interest payments between 2011 and 2018 that totalled a collective overpayment of $2.9 million.

ASIC claims CBA provided customers with terms and conditions for certain credit products at an average interest rate of 16 per cent per annum.

However, due to a system error more than 2200 business overdraft customers were charged a higher rate, which in most cases was about 34 per cent.

A system error led to the overcharging of interest. Picture: Annette Dew

It has also been alleged CBA attempted to manually fix the overcharging error in 2013 but was unsuccessful and continued to allow customers to incur higher interest charges.

ASIC claims CBA contravened financial services laws on 12,119 occasions between December 1, 2014 to March 31, 2018.

The major bank has set up a remediation program that has already compensated $4 million to customers impacted by the system error.

The date for the first hearing is yet to be scheduled by the Federal Court.

Originally published as Commonwealth Bank taken to court for charging customers too much interest