Banks overcharged borrowers $55 million after offset failures
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The news: Eight of Australia’s largest banks have overcharged Australians more than $55 million after sector wide failures to properly recognise borrowers’ mortgage offset accounts.
After receiving a string of reports between September 2023 and August last year, ASIC commenced a targeted review of the Commonwealth Bank, Westpac, ANZ, Macquarie, ING, AMP, HSBC and Credit Union Australia, finding shortcomings at each to the detriment of customers.
ASIC found that the banks struggled to identify offset requests, inconsistently detected issues, failed to compensate customers and were slow to fix issues, with customers lacking visibility over their accounts.
The numbers: Representing more than 70% of the home loan market, the review led to customer compensation of $55 million and rising for customer who missed out in some instances on thousands of dollars in offset savings each.
The group failed to detect 77% of reported offset failures before ASIC’s data request, with one bank accounting for most of these.
Around $350 billion is currently held in offset accounts, up 28% from two years prior.
What they said: ASIC chair Sarah Court said the review showed banks weren’t even getting the basics right.
“In some cases, offset failures went undetected until ASIC started asking questions. That should concern every bank offering offset accounts,” Court said.
The ramifications for customers in 25 and 30 year loan products were hidden but significant.
“Loan repayments stay the same, while customers unknowingly pay more interest and take longer to repay their loan,” Court said. “Customers are doubly hit — not only losing promised interest savings but also the opportunity to use that money elsewhere.”
The context: ASIC specifically looked at new loans settled between 1 March 2025 and 31 August and followed up with how they found and responded to failures. The regulator however did not assess how interest was calculated.
One institution identified hundreds of cases where offset accounts had not even been created or linked. While an internal review found the issue, the lender did not try to compensate customers until ASIC engaged with it, with the issue now known to date back to 2019.
One bank had no process to compensate affected customers unless they received a direct complaint, while another admitted it couldn’t re-link offset accounts when a customer refinanced internally.
The source: ASIC Report
