NAB engaged in ‘unconscionable conduct’ when overcharging customers: Federal Court

The Federal Court is weighing up a penalty for NAB after finding the banking major repeatedly overcharged customers, despite knowing about the issue.

National Australia Bank engaged in “unconscionable conduct” when it continued to overcharge customers the wrong fees despite being repeatedly alerted to the problem, a court has found.

The Federal Court found the bank’s “serious apathy” towards its responsibilities to customers fell well below proper standards of conduct, resulting in thousands of businesses and individual customers being wrongly charged.

Federal Court judge Sarah Derrington said NAB acted in its own self-interest and “took advantage of the customers’ continuing lack of knowledge” by wrongfully deducting sums from accounts.

The Australian Securities and Investments Commission alleged NAB falsely represented that it could properly charge fees for certain periodic payments under the bank’s terms and conditions when it was not entitled to do so.

No penalty has yet been set for NAB, which earned at least $365,454 from to charging customers payment fees even though the bank knew overcharging was occurring. NAB charged periodic payment fees to bank customers seeking to make transactions within NAB or to other banks.

However, NAB said it would waive some payments such as those to NAB home loans, personal loans, savings accounts or other NAB service package.

These arrangements could be set up by NAB staff in a bank branch, but could continue to be charged if the details were wrongly entered in NAB’s systems.

Justice Derrington said the conduct was all the worse given the trust many Australians placed in the banks to properly calculate the fees and manage their assets.

However, Justice Derrington stopped short of making declarations that NAB breached its obligations under its financial services licence, finding the bank had put in place measures to remediate customers who were overcharged.

As at April 2021, NAB has remediated $8.3m to affected customers who were hit with incorrect periodic payment fees from August 2021.

ASIC’S deputy chair, Sarah Court, said NAB knew it continued to wrongly charge customers.

“It demonstrated that NAB was promoting its own interests over those of its customers,” she said. “Disappointingly, it took NAB over two years to switch off the periodic payment fees after becoming aware of the issue.”

A NAB spokesman said the bank apologises to all impacted customers.

“We acknowledge some customers were incorrectly charged for periodical payment fees several years ago,” he said.