ME Bank is facing potential legal action from ASIC over failing to notify thousands of home borrowers that their fixed rate loans were due to expire and be repriced at variable rates.
Banking Day understands that the regulator has referred the alleged disclosure breaches to the Director of Public Prosecutions for potential court proceedings.
Bank of Queensland alerted investors to the possible legal action facing ME in a retail capital raising document filed to the ASX on Monday.
“…there is an ongoing regulatory investigation by ASIC in respect of the conduct of ME Bank, which, whilst proceedings have not yet been commenced, may result in litigation (including criminal proceedings following a referral by ASIC to the Commonwealth Director of Public Prosecutions) or other enforcement action as well as significant penalties,” BoQ told investors in the offer document.
“The investigation relates to suspected contraventions of the National Credit Code, Corporations Act and ASIC Act 2001 by ME Bank, its directors and/or officers.”
While BoQ did not give precise details of the alleged legal breaches committed by ME, Banking Day has been told the matters are unrelated to complaints brought against the bank on the redraw issue last year.
Instead, they relate to approximately several thousand home loans that were repriced by the Melbourne-based lender in 2016.
It appears that ME failed to give proper notice of the pricing changes to the affected borrowers.
Banks are required to communicate with home borrowers before fixed rate loan terms are due to expire and notify them of their options before loans are converted to variable rates.
BoQ also revealed in the document that ME Bank was also engaged with AUSTRAC in relation to the target bank’s compliance with anti-money laundering laws.
BoQ is seeking to raise almost A$700 million from retail shareholders to complete its funding requirements for the 1.32 billion buyout of ME announced last week.
The retail offer is scheduled to close on 10 March.