ASIC sues NAB over non-contractual fees charged to customers

The corporate regulator is suing NAB in the Federal Court, saying it knowingly charged customers fees it was not entitled to.

ASIC has taken action against National Australia Bank in the Federal Court. Hollie Adams/The Australian

The corporate regulator is suing NAB in Federal Court, alleging the lender engaged in unconscionable conduct when it overcharged customer account fees over a four-year period, during which time NAB knew it was charging the incorrect fees but kept doing so anyway.

Between February 2015 and February 2019, NAB overcharged fees for periodic payments on at least 195,305 occasions, totalling $365,454, according to the Australian Securities and Investments Commission.

The overcharging took place even after NAB became aware of the issue in October 2016, the regulator alleges.

The error saw some customers charged a fee of either $1.80 or $5.30 on payments made to other accounts within the bank or to accounts at other banks when they should have been charged nothing. In other instances, customers were charged $5.30 for each payment when the correct fee was $1.80.

ASIC alleges that by charging the fees — and not notifying the regulator when it discovered the issue — NAB made false or misleading representations; engaged in misleading or deceptive conduct; and contravened its obligation as an Australian financial services licensee to comply with financial services laws.

The regulator is seeking declarations of contraventions of the ASIC Act and the Corporations Act, pecuniary penalty orders, adverse publicity orders and ancillary orders, including costs.

But NAB has appeared to put the blame for the blunder squarely on human error rather than a compliance issue or technological failures, with a spokesperson telling The Australian that staff had selected the wrong fee when manually entering details into its system.

“NAB acknowledges that it charged some customers incorrectly for periodical payment fees because staff members selected an incorrect fee when setting up a payment arrangement for a customer,” the spokesperson said.

“NAB has cooperated with ASIC throughout the periodical payments investigation and takes the claim very seriously. We are carefully considering the allegations made by ASIC in the proceeding.”

While the regulator’s action against NAB concerns the four-year period to 2019, due to the six-year statute of limitation, documents submitted to the court by the regulator allege that the bank was actually overcharging customers on these fees from as far back as 2001.

The lender became aware of the error in October 2016, after ASIC issued a media release in relation to ANZ overcharging customers on its periodic fees, prompting NAB to take a closer look at its own accounts, according to the court documents.

It took NAB until July 2018 to notify ASIC that it had been overcharging customer fees. It was also at this time that it began notifying customers and refunding them the fees taken from their accounts.

ASIC alleges that between at least January 2017 and July 2018, NAB continued to charge customers the periodic payment fees even though it knew overcharging was occurring and did not have systems to prevent those fees from being charged incorrectly.

NAB did not change its systems to prevent overcharging until February 2019, when it ceased to charge those fees to customers, ASIC said.

NAB is in the process of refunding customers who were incorrectly charged the fees from August 2001. So far it has made payments totalling more than $8m.

A date has yet to be determined for a case management hearing.

Additional reporting: Lachlan Moffet Gray