ME Bank has been forced to stump up cash incentives to hold on to angry borrowers affected by the controversial changes to redraw facilities announced last month.
Customers who had redraw access slashed on 27 April told Banking Day that ME had begun offering financial inducements to keep their loans and other accounts with the bank.
The bank is facing a customer exodus this month as the backlash over the redraw changes intensifies and other lenders sweeten cash-back offers for refinancings.
One borrower who requested anonymity said he had accepted an offer from ME to waive his A$395 annual member package fee for the next two years in return for not taking his loan elsewhere.
The decision to waive the fee for many aggrieved customers is likely to punch a hole in the company’s revenue line this year because member packages entitle borrowers to lower variable interest rates and other discounts.
Customers are also reporting that the bank is acceding to requests for redraw balances to be moved outside of their loans and into separate deposit accounts.
“I asked them to do it because I can’t take the risk that my redraw access won’t get squeezed again,” another ME borrower said.
“I don’t trust them.”
ME’s desperate moves to buy back customer loyalty came as the Australian Financial Complaints Authority announced it had activated its significant event response plan to handle a deluge of formal complaints against the bank.
“The significant event response plan is activated for events that can potentially result in significant numbers of related complaints coming to AFCA,” the authority said in a statement.
“It provides for early communication with relevant stakeholders and a more streamlined, expedited process for the resolution of related complaints.”
The AFCA announcement escalates the customer relations crisis at ME and brings into sharp focus the extent of the reputational damage caused by the redraw controversy.
Pressure is mounting on senior officers of the company including the chief executive Jamie McPhee and chairman Jim Evans to make comment publicly on the redraw crisis after shareholders panned the bank for the fiasco.
Borrowers affected by the redraw changes say the bank has reduced their redraw balances by as much 20 per cent.
In comments posted on ME’s Facebook page on Monday, some customers reported they had still not received letters from the bank notifying them of the redraw changes.
While ME has apologised for not giving borrowers sufficient notice of the change, a bank spokesperson said on Monday night the bank had not breached disclosure requirements under the terms and conditions governing the affected loans or the banking code.
Paragraph 11.5 of the Super Member Home Loan terms and conditions state that the bank must give at least 30 days’ notice in writing to borrowers before changes take effect.
However, it is not clear whether such notice is required for curtailing access to redraw facilities.