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The Federal Court has ordered the major bank to pay a hefty penalty for unconscionable conduct.

National Australia Bank (NAB) has been slammed with a $2.1 million penalty for continuing to charge periodic payment fees despite the major bank knowing it was wrongfully overcharging customers in what the Federal Court has deemed as unconscionable conduct.

It was found that between January 2017 and July 2018, the major bank continued to charge periodic payment fees when it knew it had no contractual entitlement to do so, with the NAB wrongfully charging fees on 74,593 occasions totalling $139,845–2,888 personal banking customers and 513 business banking customers.

Deputy chair of the Australian Securities and Investments Commission (ASIC), Sarah Court, said the major bank had “omitted to tell its customers of that wrongful charging”.

“It took NAB over two years to stop charging these incorrect fees, which was clearly unacceptable,” Ms Court said.

“The Court concluded that the central cause of NAB’s wrongful charging was the bank’s inability to manage its own computer systems and its unwillingness to apply sufficient resources to remedy the problem in a timely manner.”

Ms Court added that an unconscionable conduct ruling, its penalty, and remediation program demonstrate the “consequences from not resolving an issue in a timely way”.

“If systems have let customers down, we expect all financial institutions, especially our banks, to act quickly to reduce consumer harm,” Ms Court stated.

Justice Derrington found that NAB had “unjustifiably advanced its self-interest” while being privy to the fact that customers were unaware that they were being wrongfully charged.

“It deliberately and cynically took advantage of its customers’ unawareness, and was prepared to allow the overcharging to continue whilst it searched, admittedly in good faith, but without any great diligence, for a solution,” Justice Derrington said.

“Such moral dereliction would seem to reflect an inherent sense of entitlement, possibly precipitated by a view that no real harm would come to the bank even if its conduct was detected.”

Justice Derrington noted that the only penalty that could “appropriately be imposed is $2.1 million”, the maximum penalty for the single contravention.

NAB has already paid around $9 million in remediation to the affected customers that were incurred wrongful period payment fees from 1 August 2001, on top of the $2.1 million penalty.

In addition, the major bank has been ordered to pay ASIC’s costs and publish an “adverse publicity notice” on its official website.

On the penalty, Justice Derrington said that it is “woefully insufficient” given the circumstances.

“However, some solace can be taken in the fact that, in the time that has passed since the contravening conduct in this case occurred, the relevant provisions of the ASIC Act have been updated to permit the imposition of a substantially higher penalty,” Justice Derrington concluded.

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