Few mortgage errors found

By MATHEW DEARNALEY

Weekend Herald readers whose bank statements have been analysed by an Australian computer program appear not to have been stung by errors reported across the Tasman.

Most home mortgage statements checked by West Auckland businessman Chris Seagar, the program's New Zealand agent, have been found free of glitches in non-leap years.

But Mr Seagar says there should be no errors and he is dismayed that all main banks consistently overcharge customers in leap years.

The Herald sent statements from about 60 readers to Mr Seagar after the program's author, former Australian banker Kevin Nowland, said New Zealanders could be paying banks hundreds of millions of dollars too much.

This was because most of the main banks had their head offices in Australia, where he estimates customers have been overcharged $2.5 billion to $3 billion in the past five years.

He said he based this estimate on a survey of statements supplied by 600 Australians, which found a 54 per cent error rate mainly in the banks' favour, with an average overcharge of $500 a year on a $190,000 mortgage.

Mr Seagar said many statements sent by Herald readers lacked enough information, mainly notices of interest rates changes, for proper analysis and he believed a case remained for a full inquiry into bank charges.

Banking Ombudsman Liz Brown confirmed she had seen no evidence of interest overcharging but said that she could respond only to complaints received and lacked jurisdiction to initiate inquiries.

Of 12 full sets of statements checked by the Herald against Mr Seagar's analyses, all included leap year interest payments slightly higher than if the annual rate had been divided by 366 rather than 365 days.

For example, a reader with a $170,000 home loan paid $50.31 more in 1996 than his strict mathematical liability.

There were also small overcharges of less than $20 in non-leap years found in two mortgages.

Aside from mortgages, the only revolving credit loan able to be analysed from information received contained an apparent overpayment of $112.47 in its first month, on principal of $560,000.

Mr Seagar suspects a change in interest rates was introduced too soon, and advises bank customers to check their statements back several years because glitches are more likely during downward adjustments.

"The cynic in me says banks take more care when the rates are moving up," he said.

But ASB Bank marketing general manager Barbara Chapman said the bank had obtained Mr Seagar's software and found no mistakes in analyses covering 56 months of 18 standard home loans and seven flexible loans.

Mr Seagar first tried the software after finding more than $500 in fee errors in his own ASB revolving loan, using it to turn up interest overcharges of $223, which the bank has repaid.

He has also shown the Herald statements from a different bank, which refunded a customer more than $25,000 in overcharges after the man, who is not yet ready to be identified, complained to it of financial distress.

Mr Nowland has meanwhile received a letter from a North Shore businessman who claims to have used his software to have detected more than $1400 in overcharges over three years.

The man says the bank refunded him in full and he was prepared to let the Herald inspect the letter only after it signed an agreement not to identify him or his bank, for fear of retaliation by the bank.

Mr Seagar and associates are continuing their analyses, after which bank statements will be returned to readers.

The banks - a Herald series

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