BOQ responds to criminal charges facing ME Bank

A total of 62 charges have been laid against ME Bank, 44 of which relate to letters issued to home loan customers between September 2016 and September 2018.

ASIC has claimed the letters made false and misleading representations about:

• Customers’ relevant annual interest rates, and/or 
• The minimum repayment to be paid after the fixed-rate period expired, and/or
• The minimum repayment to be paid after the interest-only rate period expired

A further 18 charges relate to ASIC allegations that between December 2016 and February 2018, ME Bank failed to give written notice to home loan customers that their annual interest rates and minimum repayment amounts were changing after their interest-only rate and/or fixed-rate period expired.

The regulator reported the alleged misconduct occurred due to failures in the bank’s systems and processes.

A spokesperson for ME Bank’s parent company, Bank of Queensland (BOQ) confirmed there had been a case management hearing on Tuesday, over the alleged contraventions of the ASIC Act and the National Credit Code. 

ME Bank had self-reported the issues to ASIC in October 2018 and paid remediation to all affected customers in 2019, totalling $105,000.

“BOQ Group was aware of this matter during the due diligence process for the acquisition of ME Bank,” the spokesperson said. 

“As these matters are before the court, BOQ Group does not intend to comment further at this time.”

ME Bank became part of the BOQ group in July, under a $1.3 billion acquisition.

The case is the first criminal prosecution under consumer protection provision s12DB of the ASIC Act. 

Under the law, making false and misleading representations to customers with respect to the price of services in connection with the supply of financial services is an offence.

The maximum penalty ranged between $1.8 million and $2.1 million at the time the conduct occurred.

A credit provider’s failure to notify customers of interest rate changes or repayment rates is also considered offences under section 64(1) and section 65(1) of the National Credit Code.

The maximum penalty for the breaches ranged between $90,000 and $105,000 at the time the conduct occurred.

ASIC originally filed the charges in the Federal Court in May.

It has been prosecuted by the Commonwealth Director of Public Prosecutions following an investigation and referral by ASIC.

The matter will return to court on 3 November.

Last year, ME Bank faced criticism when it reduced the amount borrowers could redraw from specific legacy mortgage products without forewarning customers. 

The policy decision was met with backlash from customers, brokers and the broader community. 

In response, ME announced that it would review its decision in consultation with affected customers before revealing that it had decided to “change back” home loan redraw limits for any customers who wish to opt out.

Following on from the controversy, former chief executive Jamie McPhee was called before the House of Representatives standing committee on economics for “an urgent public hearing” into the matter and acknowledged that while the decision was “poorly communicated”, he added that he believed the bank made the right call.

“We absolutely believe that the decision we made was the right decision, because we want to [make] sure people don’t inadvertently overcommit,” he said.

“We think it’s the right decision, poorly communicated.”

In July 2020, Mr McPhee announced he was resigning from his role, with the bank’s chief financial officer, Adam Crane, stepping in before taking on the role of CEO on a permanent basis in December 2020.

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