ASIC fines CBA over responsible lending breaches

by Phil McCarroll19 Sep 2016
The Australian Securities & Investment Commission (ASIC) has handed Commonwealth Bank of Australia (CBA) four infringement notices totalling $180,000 in relation to breaches of responsible lending laws when providing personal overdraft facilities.

The infringement notices were handed to CBA after it self-reported to ASIC after an internal review identified a programming error in the automated serviceability calculator used to assess certain applications for personal overdrafts.

The review found that between between July 2011 and September 2015 CBA’s failed to take into consideration the declared housing and living expenses of some consumers.

In that period, CBA’s serviceability calculator substituted $0 housing expenses, and living expenses based on a benchmark which in some instances was substantially less than the living expenses declared by the consumer resulting in an over-estimation of the consumer's capacity to service the overdraft facility.

The error resulted in CBA approving 9,577 consumers for overdrafts which would have otherwise been declined and 1,152 consumers for higher overdraft limits than would have otherwise been provided.

Some consumers were approved for a personal overdraft, or an increased limit on their personal overdraft, even though their declared expenses were greater than their declared income.

As a result, CBA has informed ASIC that it will write off a total of approximately $2.5 million in personal overdraft balances.

ASIC Deputy Chairman Peter Kell said it was important lenders monitor their systems and processes, particularly automated ones.

“Credit licensees should continuously monitor their internal processes to ensure compliance with the law,” Kell said.

“This is especially the case with automated decision-making systems where ongoing monitoring is needed to ensure that information is correctly inputted into systems,” he said.