CBA to pay $ 7 million fine for overcharged interest – Royal Commission case study



The Federal Court of Australia ordered the Commonwealth Bank of Australia (CBA) to pay a fine of $ 7 million after the court previously ruled that the CBA made false or misleading statements and engaged in a deceptive and deceptive behavior (21-025MR).

These statements related to 12,119 occasions where the CBA was charging an interest rate on corporate overdraft accounts significantly higher than its clients had been notified.

ASIC alleged, and the ABC admitted, that from December 1, 2014 to March 31, 2018, the ABC:

  1. provided customers with terms and conditions for certain credit facilities that indicated an interest rate to be charged or that had been charged (in most cases 16% per annum)
  2. sent periodic account statements to customers showing the rate at which the interest rate was charged (in most cases 16% per annum), and
  3. due to a system error, more than 1,510 clients charged a different and higher interest rate on their overdraft accounts (in most cases, around 34% per annum).

In making the penalty decision, Justice Lee considered detailed written submissions on penalties in addition to oral submissions from ASIC and CBA. CBA argued that an appropriate fine was $ 4-5 million and ASIC argued that an appropriate penalty was $ 7 million.

His Honor concluded that the CBA’s conduct was serious, that the number of false and misleading statements was significant, and that conduct of this type and nature must be prevented.

His Honor rejected the argument that the CBA acted quickly to remedy the error and concluded that the CBA’s delay was particularly troubling given the relationship between a bank and its customers.

ASIC Commissioner Sean Hughes said: “Financial services institutions need to put in place appropriate systems, governance and controls to ensure that they deliver on promises made to their clients. When CBA failed to resolve this error after it was identified, customers were overcharged by over $ 2 million in interest.

“The CBA’s delay in recovering clients from this error was an aggravating factor in determining the sanction by the court. When financial institutions discover overcharging, they should take immediate action to remedy affected consumers.

As Justice Lee admitted, the CBA has made an important confession to its numerous contraventions of the law. ABC is now investing in its systems as a priority. All financial services institutions should make similar commitments to restore confidence in our financial system and avoid further failures. “

The case will be returned to court on April 30, 2021 to determine the form and content of the publication order and an order regarding ASIC costs.


On November 30, 2020, ASIC commenced proceedings against CBA for overcharging interest on small business loans. Total interest overcharged exceeded $ 2.2 million. ASIC found that the CBA’s conduct in this matter was the result of inadequate systems and processes (20-305MR).

The CBA’s conduct was the subject of a case study by the Royal Commission on Misconduct in the Banking, Pensions and Financial Services Industry – see Volume 2 of the Interim Report (pages 304-308).

The CBA remedied $ 3.74 million to affected customers in the case.

In an unrelated case, ASIC previously obtained a $ 5 million penalty against CBA for failures to their AgriAdvantage Plus plan. These failures included, among other things, overcharged interest on loans and fees (20-129MR).

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