The Commonwealth Bank of Australia has been handed a $7 million fine for overcharging interest to customers.
The Federal Court of Australia today determined that there were 12,119 instances where Australia’s largest bank had charged rates of interest on small business loans that were “substantially higher” than what they should have been.
The total amount of overcharged interest came to more than $2.2 million.
Customers were told they would be charged 16 per cent interest in most cases, but a systems error saw more than 1,510 customers charged a higher rate of 34 per cent.
CBA had argued that the appropriate penalty for the misconduct was $4-5 million, but corporate watchdog ASIC argued that the penalty should be $7 million.
Justice Lee, who issued the Federal Court decision, said the type and volume of misconduct was serious and had to be prevented in future, and also found that the bank was too slow in remedying the error.
ASIC commissioner Sean Hughes said CBA’s failure to rectify the damage was an “aggravating factor” in deepening the bank’s penalty.
“When CBA failed to resolve this error after it was identified, customers were overcharged more than $2 million in interest.
“CBA is now making investments in its systems as a matter of priority. All financial services institutions should make similar commitments to rebuild trust in our financial system and to avoid further failures.”
The big bank has remediated $3.74 million to affected customers.
A CBA spokesperson said that it investigated the overcharging error after it was put into the spotlight by the Banking Royal Commission as a case study.
"We co-operated fully with ASIC’s investigation and did not defend the proceedings," the spokesperson said.
"Failures of this sort are unacceptable and we apologise to those customers who at the time were overcharged fees."
The bank has addressed the problem that caused this error, and 2,269 customers have been issued refunds, the spokersperson continued.
"The remediation program has now concluded."
CBA customers who have concerns or questions about the matter should contact their CBA relationship manager or the bank's Business Bank Service Centre on 13 19 98.