Banking royal commission: ANZ is still charging the wrong interest rate

Australian Financial Review Mar 21 2018 12:16 PM

James Frost

Problems with ANZ's administrative systems that led the bank to charge customers the wrong interest rate are still being found almost 10 years after they were first discovered.

Around half a million ANZ home loan customers were charged the wrong rate on their home loans after the bank failed to apply discount rates or factor in offset accounts leading the bank to pay as much as $90 million in remediation.

During the hearing on Wednesday morning it was revealed that the bank was still picking up problems with the system as it was preparing its submission to the Royal Commission in January. The size of the most recent cohort identified by the bank has not been disclosed but believed to be significant.

Counsel assisting Albert Dinelli asked ANZ's head of home loans Sarah Stubbings to walk the commission through a detailed analysis of the problems that led to customers being charged incorrect rates and fees.

The explanations given by ANZ's Ms Stubbings were unexceptional with the problems experienced by one cohort of customers being traced back to the simple failure of a data centre in Bangalore to apply the relevant discount.

"Am I right to understand in the course of preparing your statement, you've identified that there was an issue in relation to the remediation process ... to this very issue?" Mr Dinelli asked.

"Yes" Ms Stubbings responded.

"So a further issue arose by reason of preparing this statement?" Mr Dinelli asked.

"Yes, it's not so much a further issue arose, it was more that when the remediation was done ... we identified that it did not pick up customers who had closed their accounts between January 2013 and January 2016" Ms Stubbings responded.

"So the process you had in place to resolve this very issue didn't pick up those closed accounts?"

"Yes" Ms Stubbings answered.

Towards the conclusion of her second day of giving evidence, Commissioner Hayne sought the opinion of Ms Stubbings as to the service ANZ was providing its customers in light of its issue-prone systems.

"Do you think it is providing the financial services efficiently, honestly and fairly if customers are charged the wrong interest rate?" Commissioner Hayne asked.

"I think if that the customers are charged the wrong interest rate, that is not a good outcome for the customer," Ms Stubbings replied.

Ms Stubbings will soon leave the role to head up the customer remediation department within ANZ's newly formed Responsible Banking division.

Earlier, Commissioner Hayne admonished ANZ for failing to produce one of many email chains it had with the regulator over the various failings in home loan pricing over the last decade.

Counsel representing ANZ Matthew Collins QC apologised for the oversight and said it wouldn't happen again.

"I apologise for the omission and assure you Commissioner that steps are being put in place to ensure this kind of omission does not recur," Mr Collins said.

Commissioner Hayne also sketched out his expectations for final submissions from parties who have appeared in relation to case studies over the last two weeks of hearings.

The Royal Commission has asked for submissions to be no more than 25 pages in length and to be filed at 4pm on Tuesday April 3.

"You will notice the particularity of the deadline. A time is given, as well as a date. The time is not there simply to plump out the direction. The time is there to be complied with," Commissioner Hayne ordered.