ASIC’s criminal case against Members Equity Bank in the Federal Court is shaping as another watershed moment in the regulation of banks and credit providers across the country.
The bank, which now operates as a subsidiary of the Bank of Queensland, is facing 62 criminal charges for allegedly misleading customers about changes to interest rates and minimum loan repayments.
ME Bank appeared in a management hearing for the case in the Federal Court on Wednesday, with matter due to return to court on 3 November.
The matter is being prosecuted by the Commonwealth Director of Public Prosecutions.
The case is significant because it is the first time ASIC has launched a criminal action against a lender under the consumer protection provisions of section 12DB of the ASIC Act.
If the allegations are upheld by the court, ME faces major reputational damage and a hefty string of fines that could potentially run into the tens of millions of dollars.
ME’s new owner indicated last night that it has been engaging constructively with the Commonwealth Director of Public Prosecutions “to work towards a way forward”.
In a statement issued to media, BoQ did not comment on whether ME intended to defend all or some of the charges.
“These issues were self-reported by ME to ASIC in October 2018 and remediation paid to all affected customers in 2019 was approximately $105,000,” a BoQ spokesperson said.
“BOQ Group was aware of this matter during the due diligence process for the acquisition of ME Bank.
“BOQ Group has been engaging constructively with the CDPP to work towards a way forward.
“As these matters are before the Court, BOQ Group does not intend to comment further at this time.”
Forty-four of the charges relate to letters issued by the bank over a 24-month period ending in September 2018.
ASIC alleges that ME made false and misleading representations in the letters to home borrowers about their annual interest rates and minimum loan repayments after the expiry of fixed rate and interest-only periods.
Each of these alleged offences could attract maximum fines in the range of A$1.8 million and $2.1 million each.
The other 18 charges relate to ME’s alleged failure to give written notice to borrowers about changes to annual rates on their loans and minimum monthly repayment requirements.
ASIC alleges that each of these non-disclosures were due to failures in the bank’s systems and processes.
The non-disclosure breaches could each attract penalties of between $90,000 and $105,000.