NAB to pay ‘woefully insufficient’ $2m penalty for overcharging customers

The judge labelled the maximum penalty available insufficient considering the severity of the offence and NAB’s repeat behaviour.

Sarah Court, ASIC Deputy Chair.

NAB has been penalised $2.1m for engaging in “unconscionable conduct” when it overcharged customers fees it knew it wasn’t entitled to in 2017 and 2018, a modest fine the court said was “wholly inadequate” for the severity of the offence.

Federal Court Justice Roger Derrington also ordered NAB to publish a notice on its website informing the public it “continued to charge its customers periodical” fees totalling $139,845 when it knew it had no contractual entitlement to them.

He said that even when it was the maximum penalty available to the court at the time, the fine was “woefully insufficient in the circumstance.” Particularly “when viewed against the nature of NAB’s conduct, especially its disregard of its customers’ rights over an extended period of time.”

“In a context where NAB has been a repeat offender against the financial services legislation in this country and, as this case and others reveal, it appears to place a low priority on respecting the legal rights of its customers, a penalty several times the statutory maximum would have been far more appropriate.”

The federal court last year found NAB had continued to charge the fees despite being repeatedly alerted to the problem. It found NAB had acted in its own self-interest and “taken advantage of the customers’ continuing lack of knowledge” by wrongfully deducting sums from accounts.

“Some solace can be taken in the fact that, in the time that has passed since the contravening conduct in this case occurred, the relevant provisions of the ASIC Act have been updated to permit the imposition of a substantially higher penalty,” Justice Derrington wrote in the judgement.

Australian Securities and Investments Commission (ASIC) deputy chair Sarah Court said the regulator was reviewing today’s judgement and penalty, adding that the current regime would impose a fine “in the order of $250m” for the same kind of conduct.

“There is a lot of important points in this judgement for us to think about and digest and so we are certainly considering those issues,” she said.

“While the penalty is much lower than we think is appropriate for this kind of conduct, there is now a new regime applying where this conduct to happen again today.”

The court found that NAB‘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.

Ms Court, said the severity of this case stemmed from the fact the bank continued to wrongly charge the customers despite knowing it was not entitled to do so and showed no interest in fixing the problem.

“We hear time and time again from large financial institutions when they engage in unlawful charging of customers that: ‘Look these are legacy systems. They are technical issues. etc.” there are always reasons for why these (errors) happen,” she said.

“And what the judge said is that the problem here was the unwillingness to devote the resources that were needed to fix it.”

NAB has apologised for the overcharging.

A spokesman for NAB said the Melbourne-headquartered bank “acknowledge some customers were incorrectly charged for periodical payment fees” when NAB incorrectly set up personal and business banking accounts.

“We apologise to all impacted customers,” the spokesman said, adding it had repaid over $8.3m in fees plus interest to customers impacted, including those falling outside the 2017-2018 period involved in ASIC’s lawsuit.