Bank blunders sting borrowers

By MATHEW DEARNALEY

New Zealand borrowers may be repaying banks hundred of millions of dollars they do not owe, says a senior Sydney bank manager turned consumer watchdog.

Kevin Nowland believes New Zealanders are $300 million to $400 million out of pocket, based on computer research that suggests Australians have overpaid their bankers $2.5 billion to $3 billion in the past five years.

The Australian estimate was based on a survey of the bank statements of 600 people, using software Mr Nowland developed.

It found a 54 per cent error rate - and all but 15 per cent were in the banks' favour.

The average overcharge on a mortgage of about $190,000 amounted to $2500.

Mr Nowland headed three divisions of a major second-tier Australian bank before discovering millions of dollars in overcharges to customers - including $60,000 on his own housing loans.

After taking his concerns to his board, he was made redundant, but will not name the bank because of what he says was a confidential settlement in his favour.

An Auckland businessman, Chris Seagar, has used Mr Nowland's software to detect overcharges of up to $25,000.

These arose when a bank increased its interest rate to a fellow small businessman from 8.95 per cent to 24.15 per cent on overdrafts above a certain sum, without notice or agreement.

Mr Seagar said the bank had refunded most of the overcharges, but he was now seeking interest payments on his client's behalf.

He had also used the software to detect interest overcharges of $223 on a revolving loan from his own bank, the 75 per cent Australian-owned ASB, after finding more than $500 in fee errors.

He believed he could have ended up paying $2475 too much on the 12-month term of his loan, without counting the fee errors, had he not discovered the initial overcharging and made the bank rectify it.

For the first three months, the bank kept charging 1.5 per cent too much despite successive falls in interest rates, quoting incorrect rates in statements and even in a notice from its operations general manager.

The bank refunded him in full in several instalments, blaming human error and offering Christmas gift vouchers for the inconvenience, but Mr Seagar said he would have preferred a guarantee of greater accuracy.

ASB spokeswoman Barbara Chapman said yesterday that the bank had incorrectly loaded Mr Seagar's loan into its system as an overdraft, but would eventually have detected its mistake without prompting.

Mistakes in adjusting interest rate changes to normal mortgages would be highly unusual, she said.

The Bankers' Association is sceptical about Mr Nowland's claims, although executive director Errol Hanna acknowledged that "he may well be on to something - I don't know."

Massey University banking studies director David Tripe confirmed that some interest calculations by banks in Australia "have been known to be a bit peculiar," but doubted whether serious overcharging had spread to New Zealand.

The only banks operating common systems on both sides of the Tasman were the ANZ and Bank of New Zealand, and he did not believe they had been the main culprits in their home country.

Mr Nowland's main concern is time lags between announced cuts in interest rates and adjustments to customer accounts, but Mr Tripe said: "I am surprised that somebody could manage to stuff up something so simple."

The banks - a Herald series

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