Banks Behaving Badly - I Hate Banks.com.au

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Bank Rip-Offs Revealed - Click for Video

We have named this article after a story which was run on the ABC’s 4 Corners current affairs program entitled "Banks Behaving Badly". Their program was an exposé on the common bank practice of overcharging customers on interest and charges. The public reaction at the time was overwhelming, with talk-back radio programs across the nation subsequently devoting air time to the subject.

The Today Tonight program also ran a national feature on the problem, with the financial presenter for that program, David Koch, discovering a $4000 error on his own personal account.

Interest overcharges usually go unnoticed, like a $275 interest charge when it should have been $241. But over time, and with the effect of compounding, the error can blow out to be worth $1000’s or even $10’s of thousands of dollars lost.

The problem is so widespread that there is even a website dedicated to the issue called Mortgage Watchdog and through which accredited software is available to enable customers to verify their bank statements.

For our part, we have compiled a summary of a number of newspaper articles we found which detail cases of people having been affected by the problem.

The Sun-Herald ran an article on 24-Jan-1999 entitled "Man who took on the NAB". It was about leading Sydney economist Akis Haralabopoulos who had written to the banking Ombudsman urging them to investigate whether the National Aust. Bank (NAB) had "a deliberate policy of over-charging". He warned: "The wider community is not in a position to meticulously read complicated documents and tenaciously pursue banks through written complaints". In all the cases where Mr Haralabopoulos was overcharged he had been refunded by the NAB, but only after "several letters and threats to initiate legal action".

Paul Clitheroe, host of the Money program, wrote an article relating the story of Graham Holstein, who was covered in an article in Money magazine by Chris Walker, as having found $97,000 in interest overcharges over a 10yr period. He also cited the case of a business who had found overcharges amounting to $41,000 on their combined accounts.

The Australian Financial Review ran an article dedicated to the problem entitled "Mortgage Mistakes Cost Plenty" on 15-Aug-1997. Subsequently, in May 1998, the AFR again ran an article on 1700 NAB customers who had been incorrectly charged fees on their accounts in late Feb and early March of that year.

The Sun-Herald ran an article on 06-Apr-1997 entitled "Why you can bank on loan figure errors". It quotes Interest Research Bureau statistics as finding that the average error on a 3yr $50K overdraft is $15K in the banks favour.

The Sydney Sun-Herald on 7-Feb-1999 carried the story of accountant George DaCosta who was overcharged $26,500 too much in interest on his NAB overdrafts over a period of several years. The Interest Research Bureau, whom he engaged to audit his statements, claimed that 90% of the loans it examines contain errors in the bank’s favour. These generally go unnoticed as they are only relatively small initially, but over time the error can blow out to $10’s of thousands of dollars as the bank charges interest upon interest on the overcharge.

The Daily Telegraph on 06-Jul-1998 ran a story entitled "Errors cost borrowers a fortune". It quotes former Citibank executive Joe Naggy, who had left to run a financial consultancy firm Midmark, as stating that he had found errors on 60% of the 1500 accounts he has checked for clients. He stated that some customers had been overcharged $10’s of thousands of dollars when taking into account the compound effect of the errors over a period of years. The same article quoted a former Advance Bank executive, Mr John Scilly, now a licensee for a statement checking company as stating: "We recently checked 282 normal statements and 152 of those were incorrect. It is really alarming".

On 2-3 March 2002, the Weekend Australian ran a story entitled "ANZ does its sums on botched interest" which revealed that the bank had been forced to compensate 6000 customers who were overcharged interest because of calculation errors.

And the problem is not isolated to Australia. On 3-4 June 2000, the New Zealand Herald ran a front page headline with the title "Bank blunders costing millions". It cited research that suggested an average overcharge of $2500 on a $190K mortgage, with New Zealanders as a whole being $300-$400 million and Australians $2.5 to $3 billion out of pocket due to bank errors in the preceding 5 years.

For those who wish to research the problem more, in addition to the stories summarised above, the following list of articles also cover the topic:

	The Sydney Morning Herald, on August 14, 1996 with an article entitled: "It pays to monitor bank’s calculations"
	The Sydney Morning Herald, June 4, 1997: "Calculated to confuse"
	The Sydney Morning Herald, April 14, 1999: "A little devil in the detail"
	The Institute of Chartered Accountants in Australia, in their "Charter" magazine in May 1997: "Checking up on the banks" and again in October 1998: "Bank Checking Made Easy"
	The Sunday Telegraph, 21 Jan 1996: "Banks rip off millions"
	The Daily Telegraph on 11 Dec 2000: "Wrong Numbers are Big Dollars" and "Lenders making errors in half of loans"
	The Sun-Herald, April 16, 2000: "Being fair and equitable"

The problem is also reflected in the banking ombudsman’s statistics – see our article Bank Errors and the ABIO – The Numbers Tell The Story. If you wish to verify your own bank statements, software for this purpose is available from Mortgage Watchdog.

On 22-May-2003, channel 7's Today Tonight program ran an investigation on a related issue, that of the banks overcharging their customers on stamp duty. A summary of their investigation can be found in our article: Mortgage Misery.