Customers left unhappy and wondering when ME Bank changed redraw

ME Bank says it consciously decided not to tell customers that it would restrict redraw facilities.

ME Bank CEO Jamie McPhee. Picture: Aaron Francis

ME Bank consciously decided not to tell customers that it would restrict redraw facilities, a federal government house committee has heard.

Fronting an economics committee for the second time, the industry fund-owned bank has been further scrutinised over its decision to change its redraw policy, which reduced a customer’s withdrawal capability amount on existing loans.

The restrictions were implemented at the height of the coronavirus pandemic and were not disclosed to the 21,790 affected customers. Redraw accounts were lowered on average by $17,500.

The urgent hearing led by Liberal MP Tim Wilson came about after conflicting evidence was given by ME and two regulators.

The committee said it had sought further information from the Australian Prudential Regulatory Authority (APRA) and the Australian Securities and Investments Commission (ASIC), regarding the bank’s actions in restricting access to redraw facilities.

It was also revealed that the automatic adjustments of customer redraw facilities has been a known issue since 2013, and was only raised to ASIC in December 2019.

The committee also heard around 4000 customers have asked the bank to reinstate the original redraw amount.

ME Bank chief executive Jamie McPhee said a communication plan regarding the redraw restrictions had been decided on March 26, but detailed the changes would be implemented before customers were notified.

“What we wanted to do is to make sure customers did not inadvertently draw above their amortisation schedule,” Mr McPhee said.

Mr Wilson said he is deeply concerned about the discrepancies between the evidence provided by ME Bank and the advice from ASIC.

“Australians who take out a banking product expect it to be available when they need it, not nabbed in the middle of the night without notification,” Mr Wilson said.

ME Bank previously apologised for the redraw fiasco, saying it got the “timing and communication wrong”, but its intent was right.

The bank is owned by 26 industry funds, including AustralianSuper which has a 20.4 per cent stake.

It also noted the issues around the redraw facility changes are partly due to the bank’s operational and technology issues, which go back several years when it first started implementing its core banking system upgrade.

APRA in its opening statement to the committee said it has been in regular dialogue with ME Bank over its redraw issues. The regulator noted it has raised concerns about the bank’s governance framework.