CommBank to stop coronavirus-impacted customers from paying compound interest on loans

The Commonwealth Bank will make a one-off payment into bank accounts who have asked to defer their loans to ensure households and businesses are not paying compound interest, according to CEO Matt Comyn.

Small business and retail customers will be able to ask for a six-month deferral on paying back their mortgage if they are in financial strife due to the coronavirus pandemic.

Many Australian businesses are suffering in the wake of the global health crisis, which has prompted banks to slash rates on small business products and fixed-term home loans.

Mr Comyn told Sky News the bank, which is Australia’s largest mortgage holder, is willing to make concessions so customers are not paying “interest on top of interest.”

“Banking works on compound interest, but during a period of six month payment deferral … we are very conscious we don’t want customers to feel like they are paying interest on interest, which they ordinarily would be,” he said.

“We have found a simple way to address that and that’s effectively to make a one-off payment into each of our customers’ accounts to offset that interest-on-interest charge.”

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