Bank facing $10 million refund bill after overcharging customers

MELBOURNE - A number of business customers with National Australia Bank (NAB) are expected to be reimbursed a total of A$10 million ($10.6 million) after it was discovered the bank had been overcharging fees and taxes for the past five years.

NAB said yesterday the error was uncovered a few months ago as the bank focused on compliance issues brought about by last year's unauthorised trading in foreign exchange options which cost it A$360 million.

NAB spokesman Geoff Lynch said the bungle centres around the collection of bank account debit tax on cheque accounts which banks carry out on behalf of state governments.

"We discovered a system error that resulted in us collecting the tax from non-cheque accounts," Lynch said.

"The priority for us now is to fully reimburse customers, including paying interest.

"It won't cost us any more than A$10 million to resolve fully."

Lynch said only "a tiny percentage" - about 100,000 business accounts - were affected.

Australian Consumers' Association spokeswoman Lisa Tait said the Reserve Bank of Australia should take a greater role in overseeing bank fees.

"Fees have increased exponentially over the past decade and this underlines that we are trusting the banks a lot - it seems to be a self-regulating system," Tait said.

Lynch said the bank reported the mistake to the corporate regulator immediately and was keeping the Australian Securities and Investments Commission abreast of how it was managing the issue.

Australia's biggest bank will release its interim result today.

- AAP