Bank ‘deeply sorry’ after backlash
ME Bank has backflipped on its policy that allowed it take money out of customers' accounts after a fierce reaction from its home loan borrowers.
The Members Equity Bank, owned by industry super funds, removed funds from 20,000 clients' redraw accounts to pay down home loans last week without proper notification.
Redraw accounts linked to a mortgage usually consist of money overpaid on the loan and can be withdrawn by the borrower at any stage.
But from last week, ME Bank used redraw accounts directly to pay down home loans as fears arose that borrowers would struggle to service loans amid the coronavirus-induced financial crisis.
The lender announced this morning it would reverse this policy, changing back home loan redraw limits for any customers who want it.
"Some of our customers have told us they want their redraw limits changed back to what they were before," chief executive Jamie McPhee said. "We are going to do that.
"We have set up a dedicated hotline for any customer who would like their redraw limits changed back or, if they prefer, they can request it online.
"We are deeply sorry; we were trying to do the right thing but we went about it the wrong way."
ME Bank has been unanimously slammed by customers and financial advocates who said the lender breached the trust of its borrowers by jumping ahead with the policy change.
But Mr McPhee said the miscommunication from the lender led to a misunderstanding.
"I would like to reassure customers that at no point did the bank 'remove funds from customer accounts' or 'transfer' any customer funds. Nor was the adjustment made for liquidity reasons," he said.
"Our priority now is to help, support and service our customers. We recognise that we need to do better. We can and we will."
The controversial move by ME Bank invoked a steady stream of abuse from furious customers sharing their frustration on the company's Facebook page.
"Absolutely disgusting treatment by a bank, helped yourself to our redraw with no communication whatsoever," one user said.
And another: "What a disgrace changing my redraw account without letting me even know. I'll be leaving as soon as my fixed period is finished. Do not use this bank."
The chief executive of the peak body for financial counsellors, Fiona Guthrie, said the lender had breached the trust of its customers.
"The bank has done it in a patronising way," she told news.com.au.
"It has looked at an issue with those accounts and not given people the opportunity to engage with them about what's the best option for those clients and their particular financial situation."
Ms Guthrie said growing redraw accounts through making payments above the loan requirement was a responsible avenue to build up funds for access during leaner times, such as a pandemic-induced economic crisis.
"The whole point of a redraw is it gives people flexibility," she said.
"Banks market this in the good times as providing that, so you can't just turn it off when the situation arises where you would think this would be useful for people.
"Even though they legally have the right to do that but ethically and in terms of community expectations, it just doesn't stack up."
Financial Rights Legal Centre's director of casework Alexandra Kelly said the bank's timing and behaviour has been "appalling".
"Firstly the communication has not been fair, timely or appropriate - most of it has been after the fact," she said in a statement to news.com.au.
"Notifying consumers after the event of closing access to what consumers believe is their money is insulting, particularly in these challenging times."
Ms Kelly said the legal centre has been contacted by ME Bank customers who were encouraged to put lump sums in their redraw with assurances it could be accessed in the event of emergencies or future needs.
"Now that need has arisen the safety net has seemingly been pulled from under them," she said.
ME Bank customers confused by the action are encouraged to call the lender's dedicated hotline for the issue at 1300 308 357 or visit mebank.com.au/changebackredraw.
Originally published as Bank 'deeply sorry' after backlash