CBA to write off $2.5 million in loan balances
The Big Four lender incorrectly approved personal overdrafts over a four-year period.
Commonwealth Bank has paid four infringement notices of $180,000 and will be required to write off loan balances after a system error allowed ineligible customers to be approved for personal overdrafts.
Between July 2011 and September 2015, a serviceability calculator used by the bank attributed $0 housing and living expenses which led to an over-estimation of the borrower's capacity to manage the loan. Approximately 10,000 customers were affected, with 9,577 being approved for overdrafts that would have otherwise been declined and 1,152 being approved for higher limits than they could afford.
CBA reported the error to ASIC following an ASIC surveillance. CBA's executive general manager of retail products and strategy, Clive van Horen, apologised to customers on behalf of the bank.
“When we make a mistake that impacts our customers we will put it right to ensure our customers are not adversely affected," van Horen said. “Once we identified this error, we informed the Australian Securities & Investments Commission and have been working with the regulator as we correct this issue for affected customers. We continue to review our systems and processes to ensure we are delivering the best possible customer experience."
Affected customers will be contacted to inform them of the error, as well as to reduce or remove incorrectly-approved overdrafts. The bank will also write off any debt associated with affected accounts, which amounts to $2.5 million. Customers' credit histories will not be affected as a result of the mistake.