Bank of Queensland customers to be refunded $12 million due to system error

The Bank of Queensland will refund customers an estimated $12 million after a system error caused them to be overcharged interest on their home loans for a number of years.

BOQ first became aware of the issue in October last year and reported the problem to the Australian Securities and Investments Commission, but ASIC only released a statement about the issue yesterday.

Current estimates predict 6,000 customers have been affected.

The bank is now working with an independent expert to review the remediation process and examine the bank’s systems going forward.

BOQ is in the process of identifying all the customers involved and ensuring they are appropriately compensated and also putting in place measures to make sure this does not occur again.

The overcharging occurred as a result of a system failure to link Mortgage Offset Accounts to some eligible home loan accounts.

ASIC says an offset account is a savings account which is linked to a person’s home loan account.

“Any money in the offset account reduces the amount of interest payable on the linked home loan. For example, if the outstanding balance on the home loan is $100,000 and there are savings of $20,000 in the offset account, then interest is only payable on the difference ($80,000),” ASIC said in a statement.

“In this case, BOQ failed to link some offset accounts to home loan accounts, which meant that money held in those offset accounts did not reduce the interest payable on the home loan accounts. As a result, borrowers paid more in interest than they should have done,” ASIC says.

Despite the new statement from ASIC, a spokesperson for the BOQ told SmartCompany there had been no new developments since its original statement last October, and the bank is continuing to repay customers as it has been doing since December 2012.

In a statement issued by the BOQ on October 12, 2012, the bank said it was difficult to determine accurately the number of consumers affected.

“Due to the complexity of the error, it is difficult to prove figures with pinpoint accuracy at this stage in respect to the total number of customers affected, over what timeframe and to what degree. However, on preliminary analysis, it appears that less than 1% of BOQ’s total customer base will be impacted,” BOQ said.

BOQ said no customer would be disadvantaged by the error.

“This program of work is ongoing and all affected customer will be notified by mail in due course. Interest will be repaid in full and adjustments will be backdated. This will be undertaken in phases over the next 12 months (approx timeframe) beginning December 2012,” BOQ says.

ASIC acknowledged the cooperative approach taken by BOQ and said there is no need for customers to lodge a claim.

SmartCompany contacted also contacted ASIC but it provided no further comment.