The customers said they believed the money was like savings that could be withdrawn at any time. Their anxiety was amplified when the bank failed to return calls. “I’ve rung the bank three times and spoken to two different departments only to be told someone will call in 48 hours,” one customer said. “I’m still waiting.”
“It’s absolutely breathtakingly stressful,” another customer said. “I was managing OK with the stress of COVID-19 until this happened.”
Instead of ME Bank I now use the catchprhase Despicable ME.
ME Bank customer
Some customers took to social media to express their outrage, while others said they would lodge complaints with ME Bank and the Australian Financial Complaints Authority (AFCA).
It comes as the big four banks have pledged to go easy on customers struggling to make loan repayments during the coronavirus pandemic. The lenders have lifted provisions for bad and doubtful debts, slashed or suspended dividends and, in the case of National Australia Bank, raised fresh capital to shore up balance sheets.
ME Bank was set up in 1994 by industry super funds with the aim of competing with the big four banks and helping Australians buy homes. According to its annual report, its home loan portfolio is $26 billion, representing almost 2 per cent of the home loan market.
The decision by ME to plunder customer accounts has prompted speculation among industry experts that it wanted to shrink the size of its loan book and reduce the risk of defaults.
Alexandra Kelly, a director of casework at Financial Rights Legal Centre, described the bank’s conduct as abhorrent. She said she was concerned that a bank subject to the Code of Banking Practice had unilaterally taken away or reduced a customer’s access to their redraw facilities. “The communication has not been fair, timely or appropriate,” she said.
“The Code of Banking Practice is clear that communication must be timely and useful. Notifying consumers after the event of closing access to what consumers believe is their money is insulting.
“This is further compounded by not having sufficient numbers of staff available to answer the frantic calls and no notice on their website. Given all the problems identified in the royal commission with banks – this behaviour is frankly a disgrace.”
One customer, scientist Monica Genova, said on Monday the bank removed $24,000 from her redraw facility and transferred it to her home loan without notice. She said most of her loan had been repaid. “It came as a huge shock as the money was considered savings to be used for urgent home repairs. The timing of this, given the uncertainty of jobs during the pandemic is despicable to say the least,” she said. “Instead of ME Bank, I now use the catchphrase Despicable ME.”
Another customer said $10,000 was transferred from her facility to her loan at a time when her hours of work and that of her husband’s had been dramatically reduced. “And they do this now! No warning no notification, no explanation.”
Another ME customer who works in financial services, Carolyn White, said her redraw facility had been reduced by one-third and $35,000 transferred to reduce her mortgage. “I can’t believe after Hayne [royal commission] that they took this course of action then have such poor execution,” she said. “The promise of a call never happened.”
ME Bank failed to respond to a series of detailed questions including how many customers were affected, the amount of money transferred to mortgages, why it failed to notify customers and why it failed to have the infrastructure in place to respond to distressed callers. It also failed to say who made the decision, why it was taken at this time, or whether it was related to the impact of falling property prices on the value of its loan book or due to capital requirements.
In a statement, it said the bank had identified that the redraw facility of some legacy home loans could lead to some customers falling behind their original repayment schedules. “ME is in the process of contacting affected customers,” it said. “Some customers could be at risk of not meeting their repayment commitments, potentially leaving them open to financial hardship at the end of the loan term,” the bank said.
It said it was reviewing the personal circumstances of each customer affected and was committed to working with them. “For customers whose limits have been reduced, the bank will look to rearrange financing at the bank’s cost. All customers have access to the three- and six-month repayment holidays.”
The bank denied the move had anything to do with the liquidity positions of its super fund shareholders, which are facing mass withdrawals from customers under a government scheme allowing Australians suffering from hardship to access their retirement savings ahead of schedule.
“ME did not ask for a top-up from shareholders to meet capital requirements and we have no need for capital from our shareholders,” it said. “Our current and forecast capital and liquidity levels are well above both internal targets and regulatory requirements. Our Liquidity Coverage Ratio is currently more than double the regulatory requirements.”
Adele Ferguson is a Gold Walkley Award winning investigative journalist. She reports and comments on companies, markets and the economy.