ME to front economics committee today over redraw debacle

author-avatar By
on June 03, 2020
ME to front economics committee today over redraw debacle

Parliament house, Canberra. Photo by Michael on Unsplash.

The House of Representatives Standing Committee on Economics will hear from ME Bank via videoconference today, as a part of an ongoing review into major banks and financial institutions.

ME will be joined by the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) at an "urgent public hearing". 

ME's appearance is in response to some discrepancies found in chief executive James McPhee's responses given to ASIC at an earlier hearing, in regards to ME's controversial decision to reduce redraw limits on mortgages without warning (which has since been reversed). 

"We note that the statements made by Mr McPhee at the hearing did not fully reflect the extent of ME Bank's communication with ASIC on the redraw issue," ASIC chair James Shipton said in a letter to Liberal MP and chair of the House of Representatives standing committee on economics Tim Wilson. 

Yesterday, Mr Wilson said that "Australians who take out a banking product expect it to be available when they need it, not nabbed in the middle of the night without notification".

"The discrepancy between ME Bank’s evidence to the committee and advice from ASIC is deeply concerning and requires further scrutiny," Mr Wilson said. 

The hearing takes place from 12pm to 1pm today. 

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
ZERO APPLICATION FEESFEE FREE OFFSET
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
  • The shorter your loan, the less interest you pay in the long run.
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
  • The shorter your loan, the less interest you pay in the long run.
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO APPLICATION FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO APPLICATION FEES

Yard Home Loan (Principal and Interest) (LVR < 80%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO UPFRONT OR ONGOING FEES

Owner Occupier Accelerates - Evaporate (LVR 60%-70%) (Principal and Interest)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO UPFRONT OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 80%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
UNLIMITED EXTRA REPAYMENTS
UNLIMITED EXTRA REPAYMENTS

Basic Home Loan (Principal and Interest) (LVR < 60%)

    Variable
    More details
    EASY DIGITAL APPLICATION
    EASY DIGITAL APPLICATION

    Neat Variable Home Loan (Principal and Interest) (LVR 70%-80%)

      Variable
      More details
      $0 APPLICATION FEE
      $0 APPLICATION FEE

      Budget Home Loan (Principal and Interest) (LVR < 80%)

        Variable
        More details
        100% FULL OFFSET ACCOUNT
        100% FULL OFFSET ACCOUNT

        Offset Package Home Loan (Principal and Interest) (LVR < 60%)

          Variable
          More details
          LIMITED TIME OFFER
          • Fast turnaround times, can meet 30-day settlement
          • No ongoing or monthly fees, add offset for 0.10%
          • Extra repayments + redraw services
          LIMITED TIME OFFER

          Smart Booster Home Loan Discounted Variable - 1yr

          • Fast turnaround times, can meet 30-day settlement
          • No ongoing or monthly fees, add offset for 0.10%
          • Extra repayments + redraw services

          Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 28, 2022. View disclaimer.

          What's the issue? 

          In early May, ME Bank outraged customers and caught the eye of regulators when it made changes to redraw facilities without giving customers prior warning. 

          The bank angered its borrowers when it drastically reduced the amount they could redraw from their home loans, meaning many lost access to thousands of dollars worth of extra repayments they'd made. 

          In total, around 20,000 customers were impacted. 

          In the immediate aftermath, Mr McPhee issued a statement saying the change was made to prevent customers from falling behind their original repayment schedules during the height of the COVID-19 pandemic. 

          “Our assessment showed there was a group of customers who were at risk of going above their scheduled home loan balance, if they were to activate the full redraw facility,” Mr McPhee said.

          “We adjusted their redraw facility to be in line with their original repayment schedule.

          “In the current environment, we thought it particularly important to ensure that customers were not inadvertently at risk of not meeting their repayment commitments.”

          The main issue with this was that ME Bank didn't contact customers before doing so - Financial Counselling Australia chief executive Fiona Guthrie told Savings.com.au at the time that if the bank was so concerned about customers it should’ve talked with them before making the changes.

          “If ME wanted to help those customers who are experiencing financial hardship, they should have spoken with them first and asked what they could do to alleviate some of their financial stress,” Ms Guthrie said.

          In 2018, the Commonwealth Bank (CBA) made changes to how minimum repayments were calculated, but actively contacted customers a month beforehand to warn them of the coming change. 

          At a hearing on 14 May, Mr McPhee told the committee the bank notified ASIC of the changes and next heard from the regulator once the issue had been made public in the media - they're supposed to give customers 20 days notice, according to federal credit legislation. 

          However, a letter obtained by The Age and The Sydney Morning Herald from Mr Shipton to the parliamentary inquiry shows that ME's account of its communication with ASIC is inaccurate.

          More information will be revealed during the hearing at 12, webcast at aph.gov.au/live.


          Disclaimers

          The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

          Latest Articles

          author-avatar
          William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

          Collections:

          Be Savings smart.
          Subscribe for free money newsletters.

          By subscribing you agree
          to the Savings Privacy Policy