ASIC has published Report 837 Offsets (REP 837) containing the results of its review of the mortgage offset account practices of eight banks.
An offset account is a transaction account linked to an eligible home loan. The money in an offset account reduces the outstanding amount owed on the loan, which is used to calculate interest. By paying interest only on the net amount owed, offset accounts can significantly reduce interest costs over time and help customers repay their home loan sooner.
While practices varied significantly across the banks, ASIC found weaknesses in how all banks set up, monitored and managed offset accounts, resulting in some customers missing out on promised savings.
ASIC says the report is relevant for all banks.
Problems include banks linking accounts to the wrong home loan, not reducing interest charges as expected, and failing to respond to customer requests to open an offset account.
ASIC identified four key findings:
* Banks struggled to readily identify customer offset account requests – Many banks could not readily identify if, or when, customers had requested an offset account;
* Inconsistent detection of offset account failures – Some banks were unaware they were failing to deliver on promises to link offset accounts to home loans;
* Failure to compensate customers and slow to fix issues – Even when banks did identify potential offset account failures, some failed to adequately assess the extent of potential customer loss and compensate customers; and
* Lack of visibility of information on offset accounts for customers – Some customers had no easy way to confirm whether their offset account was set up, linked to the right loan and saving them interest, because they could not easily access key information in their bank’s mobile app.
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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.
