Members’ Equity Bank last night denied it might have broken its own contractual terms and conditions by giving late notice to borrowers of controversial changes to mortgage redraw limits.

The bank’s senior executives were last night in lockdown crisis meetings as they tried to push ahead with a move to slash redraw caps on home loans despite a backlash from customers and many of its own shareholders.

However, ME – through a spokesperson – last night apologised to affected customers for the poor manner in which it communicated the changes.

“We communicated poorly to customers in terms of the timing and telling them what we were doing and why,” the spokesperson said in an emailed response to questions from Banking Day.

“That’s something we clearly regret and for which we now apologise.”

Redraw limits on potentially thousands of mortgages marketed under the now-shelved Super Member Home Loans brand were slashed by the bank on Monday 27 April.

Most of the affected borrowers did not learn that their capacity to redraw had been crunched until notification letters began arriving in their mailboxes last week.

This could be critical for irate customers seeking a reversal of the decision because the bank might have an obligation under section 11.5 of its terms and conditions to give written notice of “30 days or more before the change takes effect”.

Borrowers affected by the decision told Banking Day on Monday that the notification letters were marked as having been written on 23 April.

If that is correct the bank might be in breach of its own terms and conditions because an argument could be mounted it made no realistic effort to respect the notice requirement that might apply to the redraw change.

The ME spokesperson said the bank had not breached its notification requirements.

“There is no requirement to give 30 days’ notice of changes to the amount available for redraw, under the contract or under the NCCP/National credit code,” the spokesperson said.

Here is the wording of paragraph 11.5 of the terms and conditions which runs under the heading of “Other changes”:

“If we, without obtaining your agreement, vary any other term or condition of this loan contract, we will give particulars of the change in writing 30 days or more before the change takes effect.”

But ME might argue that it has complied with its disclosure requirements because the 30 days written notice condition could be qualified by an additional sentence in paragraph 11.5:

“However, where such a change reduces your obligations, we will only notify you of the change before or when we send you your next statement of account after the change takes effect.”

The extent to which ME Bank met its disclosure requirement probably hangs on whether the redraw changes lightened the “obligations” of borrowers.

Notwithstanding the question as to whether the bank acted properly, ME is now mired in an ugly imbroglio where its actions are eliciting scorn from customers and some of its own industry fund shareholders.

First Super – a fund covering workers in the timber and furniture industries - has called on the bank