“A lender has the right to change the terms of the loan contract but if the change adversely affects the borrower, they have to be given 20 days notice. It’s a minimum requirement under legislation,” Mr Williams said.
Accountant Phillip Stam received ME Bank’s letter, dated April 23, on April 30, three days after the redraw facility had been suspended. “On Friday afternoon, it was in the mail. They’d already implemented it of course,” he said.
Mr Stam has since spent hours trying to regain access to the money. “I’ve tried calling twice. Yesterday and Monday. I was on hold for an hour and just gave up and hung up. I’d had enough, couldn’t wait any longer.”
Mr Williams said the cancellation of the ability to redraw is not legal if customers are not given the appropriate notice period, and customers can lodge a complaint with the Australian Financial Complaints Authority (AFCA) to have it overturned.
“If that is cancelled on two days’ notice, that cancellation is not effective,” Mr Williams said. “What you would then do is launch a complaint with AFCA, they will find in your favour.”
AFCA activated a “significant event response plan” – last used for monitoring insurance claims after the summer bushfires and hailstorms – on Tuesday following ME Bank’s policy change, as it braces for a flurry of complaints from affected customers.
If the policy change is found to be illegitimate, Mr Williams said ME Bank could be forced to reinstate customers’ redraw facilities. Banks are required to pay AFCA to cover the costs of investigating and resolving complaints.
“If you have 100 complaints at $2000 a pop, that’s $200,000. If you have 1000 complaints, you’re up at $2 million. Then, of course, ASIC [Australian Securities and Investments Commission] won’t like that. Then you’ve got the ASIC investigation coming as well,” Mr Williams said.
University of Wollongong senior lecturer Andy Schmulow said ME Bank is also in breach of five articles in the Australian Banking Association’s code of practice, related to rules around fair and timely communication with customers.
“When you take away money that you’ve said is available for redraw and you didn’t tell people about it, I don’t see how that is compliant,” Dr Schmulow said. “Once you’ve signed up to this, every contract that is already enforced is bound by this.”
ME Bank did not respond to requests for comment.
Charlotte is a reporter for The Age.