Bankwest refunds $4.9 million it overcharged on mortgage interest

Bankwest, a subsidiary of Commonwealth Bank, has refunded nearly $5 million to customers after finding it failed to link offset accounts with home loans and overcharged interest to these customers for nearly a decade.

The issue affected customers who opened accounts between 2007 and June 2016, Bankwest said in a press release on the website of the Australian Securities and Investments Commission.  

Bankwest said it had refunded nearly 10,800 customers more than $4.9 million after it failed to link offset accounts to home loan accounts. An offset account is a savings or transaction account that, when linked to a home loan, offsets the balance of the loan account, reducing the interest payable.

Following media coverage of ASIC's work in relation to similar breaches by another bank, Bankwest undertook an internal investigation into the operation of its offset accounts. Bankwest identified issues in the linking of offset accounts with home loans and reported the matter to ASIC as a significant breach of its licence obligations. 

ASIC deputy chairman Peter Kell said, 'It is critical that licensees ensure that their systems work properly so that promises made to customers about their bank accounts are 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.'

Bankwest said it has fixed the problem, including the automatic linking of new offset accounts and contacted those customers it has identified as being affected to explain the impact and has arranged refunds.