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ME Bank’s epic PR fail results in policy reversal


Letters to customers outlining the change in policy were dated April 23, account adjustment was made on April 27 and the letters were posted on April 28, after the fact.

It meant the amount of money they could access or redraw had shrunk without warning. In some cases it was tens of thousands of dollars.

Instead of having staff available to answer their queries, customers were left hanging on the phone for hours, only to be told someone would call them back within 48 hours. Few received the follow up call in the promised timeframe.

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Customers turned to the media for assistance after failing to get answers from the bank. From there the crisis began.

Some of the stories were shocking. One customer said she had been using the draw down from her ME home loan to pay staff in a small business she runs until JobKeeper came through. The customer said she had $80,000 in the redraw but the unilateral decision by the bank to change its policy meant she couldn’t access any of it.

How could we recommend ME Bank to our children, both of whom are in the market for a home, when it behaves in such an unethical manner.

ME Bank customer

Another said her daughter was getting married in January and the plan was to use a substantial amount of the redraw to fund the costs of the wedding. “We’re not a risk to ME – we have managed our financial circumstances extremely well all the way through, and are certainly not at risk of defaulting on the loan. This action will damage the bank’s reputation with its loyal customers. How could we recommend ME Bank to our children, both of whom are in the market for a home, when it behaves in such an unethical manner.”

Others had planned to do some urgent repairs to their house. Some had lost their job or had their hours reduced due to the shut downs of large parts of the economy which has seen unemployment soar.

ME CEO Jamie McPhee says "we are deeply sorry" to customers.

ME CEO Jamie McPhee says “we are deeply sorry” to customers.Credit:Chris Pearce

“We worked hard to save this money to build a home for our children,” one customer said. “This has completely ruined our plans. We are both still working, our LVR [loan to value ratio] is 0.01 per cent… In essence we owe only $15,000 on our loan over a $1.2 million asset. If we redrew the whole redraw our LVR would have been 12 per cent. How is this justified?”

ME Bank caused huge grief to customers at the height of a global pandemic. As scientist Monica Genova said, “The timing of this, given the uncertainty of jobs during the pandemic is despicable to say the least.”

The bank’s failure to respond to customers compounded on itself and resulted in the Australian Financial Complaints Authority wading in to say it would look into the matter.

Shareholders equally felt compelled to express their displeasure publicly saying they wanted answers.

On May 5, ME chief executive Jamie McPhee finally posted a “we are sorry” and “we messed up” on ME’s website.

But it wasn’t enough. Customers were out for blood and wanted the policy reversed.

He then ratcheted up the apologies with a “we are deeply sorry”, along with a decision to reverse the policy for any customers who want it. That was on May 8.

“We were trying to do the right thing but we went about it the wrong way,” he said.

And to ensure there weren’t the previous shenanigans with customers not getting through to operators, he said ME had set up a dedicated hotline for any customer who wanted their redraw limits changed back.

The backflip was a win for customers. As one affected customer wrote: “The bank introduced a ‘new process’ today, and funds are being returned to account holders. Mine was returned this afternoon, following a call this morning. Thank you for being a crucial part of the ‘people power’ that forced this change.”

But at the end of the day the damage to ME’s reputation was self-inflicted. If it had handled itself better and gone on the front foot earlier, it would have mitigated the crisis.

The bank’s repeated refusal to answer basic questions, attracted suspicion.

So too were its attempts to explain its actions. They amounted to it being for their customers own good as “the redraw facility of some legacy home loans could lead to some customers falling behind their original repayment schedules.”

These explanations were treated with scepticism as a series of affected customers said they were ahead of their repayments and were not at risk of default. Some had a low loan to value ratio, some had virtually paid off their loan, some had never missed a payment.

The bank used a blunt instrument that appeared to treat all affected customers the same.

It raised questions about the bank’s handling of risk management.

McPhee said in a statement to customers that he wanted to reassure them that at no point did the bank remove funds from customer accounts or transfer any customer funds.”

Senator Andrew Bragg wants more transparency.

Senator Andrew Bragg wants more transparency.Credit:Nine

It is all semantics to customers who wanted to access the money but hit a roadblock.

ME Bank escaped the glare of the financial services royal commission. But its behaviour in the past few days and lack of transparency and refusal to answer questions has raised the interest of Liberal Senator Andrew Bragg, who has raised concerns on the transparency of the superannuation industry with regulators at the past few Senate Estimates / ASIC and parliamentary joint committee hearings.

“Super funds have breached the law, been fined by ASIC but have not notified members. This isn’t good enough,” Senator Bragg said. “Super has traded on opacity for 30 years which we can no longer afford.”

Given ME Bank is owned by 26 industry funds, that interest and quest for transparency is about to be ramped up.

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