ASIC has announced that it has commenced civil penalty proceedings in the Federal Court against the Commonwealth Bank of Australia (CBA) for charging a rate of interest on business overdraft accounts substantially higher than what its customers were advised.

ASIC alleges from 29 December 2011 to 31 March 2018, due to a systems error, CBA charged more than 2,200 customers a higher interest rate on their overdraft accounts (in most cases approximately 34% per annum) instead of 16% per annum provided for by the relevant terms and conditions and provided periodic account statements which constituted representations understating the rate of interest at which interest had been and/or would be charged.

ASIC says the total overcharged interest exceeded $2.9 million.

ASIC alleges that CBA attempted to manually fix the overcharging error after a complaint was made to the bank in 2013. The manual fixes were unsuccessful, and customers continued to be overcharged. ASIC alleges that from 1 December 2014 to 31 March 2018, being within the six-year limitation period, CBA engaged in conduct that contravened financial services laws.

ASIC says CBA:

• made a misleading representation in contravention of s12DB(1)(g) of the ASIC Act;
• engaged in misleading or deceptive conduct, or conduct that was likely to mislead or deceive, in contravention of s12DA(1) of the ASIC Act; and
• failed to comply with its obligation to comply with financial services laws in contravention of s912A(1)(c) of the Corporations Act.

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