Bank apologises for overcharging 2500 mortgagors

ME Bank has apologised to customers after 2,500 mortgagors were affected by a “system error” that led to borrowers being charged a higher interest rate without adequate notice.

On 17 April 2018, Members Equity Bank (ME) announced that it was raising its variable home loan interest rates, The Adviser website noted.

Under the changes, ME’s standard variable rate for owner-occupier principal and interest (P&I) borrowers with an loan-to-value ratio (LVR) of 80% or less increased by 6 basis points to 5.09% p.a. (comparison rate of 5.11% per annum).

Variable rates for investor principal and interest borrowers increased by 11 basis points, while rates for interest-only borrowers increased by 16 basis points.

According to ME CEO Jamie McPhee, the changes were brought in as a result of increasing funding and compliance costs.

While the bank did publicise the rate change two days before it was due to take effect, Martin North at the Digital Finance Analytics website suggested usual practice is for a mortgagor to be notified 20 days in advance of an interest rate change.

According to the bank, however, a “system error” led to customers being charged the new rates on 19 April without the adequate time warning.

A ME spokesperson said that the “proper process” is for ME to write to customers to notify them their repayments are going up “but not to increase their repayments until at least 20 days after they get that notification”.

“Unfortunately on this occasion, due to a system error, we increased the home loan repayments immediately for about 2,500 owner-occupier and investor customers — about 1% of our home loan accounts.”

The bank reportedly detected the “error” the following day (20 April) and “immediately intervened to ensure no additional customers were affected”, the spokesperson said.

“We are clearly very sorry for the error and the impact it has had on customers,” the CEO said.