Bankwest, the Perth-based division of the Commonwealth Bank of Australia, has refunded $4.9m in mortgage interest payments to customers after it failed to link offset accounts to customers’ home loan accounts.
The breach affected 10,800 customers who’d opened offset accounts with Bankwest between 2007 and June of last year.
Bankwest reported the breach to the Australian Securities and Investments Commission (ASIC) and also notified customers who’d been affected by the breach. According to Andrew Whitechurch, executive general manager of retail at Bankwest, 95% of the refunds amounted to less than $1000 each.
“Following a comprehensive internal investigation, Bankwest has implemented system improvements and new controls to ensure the problem does not re-occur,” Whitechurch told The Australian.
Peter Kell, ASIC’s deputy chairman, said it was critical for licensees to ensure their systems worked properly. This would ensure that promises made to customers about their bank accounts would be kept.
“When a problem is identified, licensees not only have an obligation to report the breach, but impacted customers must be returned to the position they would have been in, had the breach not occurred,” Kell said.
ASIC has been closely monitoring mortgage offset accounts due to the product’s surge in popularity. In a study conducted last year, the Reserve Bank found that cash in bank offset accounts now totalled $90bn after annual growth of about 30% in recent years.
Offset accounts are considered costly for banks because they reduce interest income. The Australian Prudential Regulation Authority also requires banks to have regulatory capital for the whole loan to guard against the risk of customers using up their offset accounts.
Collections: Mortgage News