In Australian Securities and Investments Commission v National Australia Bank Limited [2022] FCA 1324 the Federal Court of Australia declared that in the period from January 2017 until July 2018, the National Australia Bank by its conduct of continuing to charge Periodic Payment Fees to customers in circumstances where it knew that it had no contractual entitlement to do so and omitting to inform its customers as to the wrongful charging or suggest that they review any such fees debited to their accounts, engaged in conduct in trade or commerce and in connection with the supply of financial services that was, in all the circumstances, unconscionable in contravention of s 12CB(1) of the Australian Securities and Investments Commission Act 2001 (Cth).

In the period between 20 July 2007 and 22 February 2019, the National Australia Bank (NAB) wrongly overcharged certain of its customers on at least 1,608,575 transactions.

NAB charged some customers a periodic payment fee of $1.80 or $5.30 when they were entitled to an exemption under NAB’s terms and conditions; or $5.30 when the correct fee was $1.80.

The Federal Court dismissed ASIC’s claims of misleading or deceptive conduct, the making of false and misleading representations, and alleged breaches of the Corporations Act 2001 (Cth) which were based on the text of the narrations in NAB’s customer statements.

As at 28 April 2021, NAB had paid approximately $8.3 million in remediation to affected customers who incurred incorrect periodic payment fees from 1 August 2001.

The court will decide on a penalty on a future date.

Justice Derrington concluded:

“NAB’s conduct in continuing to overcharge in circumstances where it knew that it was wrongfully doing so constituted unconscionable conduct. Although customers should remain aware of the terms and conditions of their account, it is a notorious fact, fortified by the absence of customers’ complaints as to the wrongful practice, that many people generally look to the bank to maintain a correct and reliable record of the dealings, subject to the possibility of reasonable unknown error. Although this does not absolve customers from their obligation to check their statements, the bank is in a superior position to know what transactions have occurred and the validity of the charges it makes. In an Australian context, banks are generally regarded as honest and ethical participants in the financial services industry and especially those who claim adherence to the Code of Banking Practice would accept this to be so. Further, having effective control of a customer’s account, a bank can cause unjustified debits to be made in its accounts which it presents to its customers as prima facie correct, at least to the extent to which it believes that to be so and absent some unknown error. No doubt, banks will usually operate accounts only in accordance with the customer’s mandate and the terms of the contract, but that is not always the case as the present circumstances reveal. Accordingly, they bear some serious responsibility to correct their inadvertent errors disadvantaging their customers which they have caused and to do so with reasonable speed. A necessary corollary is that it would strike at the very heart of a stable banker / customer relationship were a bank knowingly to debit its customers’ accounts without entitlement….

from January 2017, its continuing to use its system despite knowing that it would be making unauthorised debits to the accounts of some customers, was not merely unjust or unreasonable. It approaches serious apathy towards those of its customers who would be adversely affected by its continued conduct. It also knew that it could prevent its continuance, but made the decision not to do so. To exacerbate its fault, it was also aware that its customers were generally unaware of the overcharging but failed to inform them at once. Again, it had the capacity to do so and to advise them to review their statements which had the real possibility of providing it with a clearer picture of the extent of overcharging and an appreciation of the accounts on which it was occurring. Rather, it took advantage of the customers’ continuing lack of knowledge, and acted in its own self-interest by continuing to operate a system which it knew wrongfully deducted sums from its customers’ accounts.

This conduct fell so far below the standards required of a bank’s obligations to its customers that it was unconscionable. It was neither proper nor right according to ordinary commercial values in Australian society, and it was offensive to conscience….

For the reasons given that it engaged in unconscionable conduct, ipso facto, it did not do all things necessary to provide the financial services to its customers whom it overcharged, efficiently, honestly and fairly. Once it was aware that its systems were wrongly charging PP Fees to some clients who had no obligation to pay them, it was neither competent nor ethical to continue to charge them and to fail to inform them or advise them to review their accounts. Neither could it be said to be fair or honest. Compliance would require suitable remedial action to be undertaken with appropriate urgency once aware of the wrong it had done.”

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