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The Banking Code Compliance Committee has sanctioned ME Bank for serious and systemic breaches of the banking code due to a disastrous home loan redraw policy instituted at the height of the COVID-19 crisis.
After reviewing ME Bank’s decision in April 2020 to change the rules of its redraw facilities without notifying borrowers, the BCCC slammed the lender’s customer communications as “poor and ineffective.”
The committee launched its inquiry after ME Bank reduced customers’ redraw limits and transferred funds from their redraw accounts to their mortgage accounts, according to a report by The Australian. The move was made without warning, and left customers unable to access their own money.
After a predictable outcry from customers, the bank quickly reversed course and offered to return redraw limits to their original amounts.
“ME Bank’s failure to rectify longstanding system issues was a contributing factor to its poor conduct at the time it made adjustments to customers’ redraw accounts,” said Ian Govey, the BCCC’s independent chairman. “It was imperative that ME Bank notified customers prior to making any adjustments to their redraw facilities, especially given the changes that took place when the COVID-19 pandemic was significantly affecting customers’ livelihoods.”
Govey also said that ME Bank should have anticipated the effect its lack of communication would have on customers.
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ME Bank CEO Jamie McPhee resigned amid the backlash to the bank’s decision, but said his decision to leave was unrelated to the redraw controversy, The Australian reported. Shortly after his resignation was announced in July, McPhee admitted that the bank had not communicated well during the redraw scandal. He said the lender should have conducted focus groups to gather feedback before making any changes.
The banking code’s guiding principles require banks to be accountable and transparent when dealing with customers.
After considering the seriousness of the situation, the BCCC decided to sanction ME Bank by “naming and shaming” the lender on its website and in its annual report, according to The Australian.
Ryan Smith is currently an executive editor at Key Media, where he started as a journalist in 2013. He has since he worked his way up to managing editor and is now an executive editor. He edits content for several B2B publications across the U.S., Canada, Australia, and New Zealand. He also writes feature content for trade publications for the insurance and mortgage industries.
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