ME Bank and redraw accounts

[Dona Ferentes]

This has blown up big time. ME Bank are not doing themselves any favours. Article in the SMH is by Adele Ferguson

'Despicable ME': The boutique bank raiding accounts linked to home loans

https://www.smh.com.au/business/ban...inked-to-home-loans-20200501-p54oxn.html?btis

Members Equity Bank, which is owned by 26 major super funds linked to big unions and markets itself as one of the country’s most trusted lenders, stunned customers on Monday when it, without permission, removed funds from redraw facilities to pay down home loans....

On its website, ME Bank promotes its redraw facility as a product that allows customers to make extra mortgage repayments and with the added flexibility of letting clients "redraw money from your loan at any time, for free."

A number of customers contacted The Age and The Sydney Morning Herald after noticing between 10 and 50 per cent of their redraw funds were absorbed into their home loan without any notification.

The customers said they believed the money was like savings that could be withdrawn at any time. Their anxiety was amplified when the bank failed to return calls. "I’ve rung the bank three times and spoken to two different departments only to be told someone will call in 48 hours," one customer said. "I’m still waiting."

"It’s absolutely breathtakingly stressful," another customer said. "I was managing OK with the stress of COVID-19 until this happened."

Some customers took to social media to express their outrage, while others said they would lodge complaints with ME Bank and the Australian Financial Complaints Authority (AFCA).....

....ME Bank failed to respond to 'a series of detailed questions including how many customers were affected, the amount of money transferred to mortgages, why it failed to notify customers and why it failed to have the infrastructure in place related to the impact of falling property prices on the value of its loan book or due to capital requirements.'

In a statement, it said the bank had identified that the redraw facility of some legacy home loans could lead to some customers falling behind their original repayment schedules. "ME is in the process of contacting affected customers," it said. "Some customers could be at risk of not meeting their repayment commitments, potentially leaving them open to financial hardship at the end of the loan term," the bank said.

It said it was reviewing the personal circumstances of each customer affected and was committed to working with them. "For customers whose limits have been reduced, the bank will look to rearrange financing at the bank’s cost. All customers have access to the three- and six-month repayment holidays."The bank denied the move had anything to do with the liquidity positions of its super fund shareholders, which are facing mass withdrawals from customers under a government scheme allowing Australians suffering from hardship to access their retirement savings ahead of schedule.

"ME did not ask for a top-up from shareholders to meet capital requirements and we have no need for capital from our shareholders," it said. "Our current and forecast capital and liquidity levels are well above both internal targets and regulatory requirements. Our Liquidity Coverage Ratio is currently more than double the regulatory requirements."

 

[tech/a]

Re draw facilities have a much higher interest rate than mortgage rates

I took out a loan for a property sometime ago
Not ME bank
12 mth later I found that the loan was being paid from my re draw account
Which I didn’t authorise and they couldn’t find what was agreed upon.
So one loan being used by another 2 sets of interest

Well I was pretty ugly when I accidentally found out
Was sorted in 48 hrs with refunds and a loan rate matching the best around

Greedy forkers.

 

[wayneL]

Wait till the first bail in. Then we might see some really sh1tty folks.

 

[Junior]

Re draw facilities have a much higher interest rate than mortgage rates

I took out a loan for a property sometime ago
Not ME bank
12 mth later I found that the loan was being paid from my re draw account
Which I didn’t authorise and they couldn’t find what was agreed upon.
So one loan being used by another 2 sets of interest

Well I was pretty ugly when I accidentally found out
Was sorted in 48 hrs with refunds and a loan rate matching the best around

Greedy forkers.

Hi Tech/a. What do you mean a higher interest rate? If you utilise your redraw and move the funds to another bank account, aren't you simply increasing the outstanding balance, and pay additional interest as per the loan's going rate? It's not like a penalty rate of interest...it's just the standard mortgage rate applied to that loan.

There was a bunch of articles about a year ago, in The Age I think, warning of the difference between redraw and offset accounts, in that the bank can cut off your access to redraw whenever they feel like it.

In this case, ME Bank have made a shocking error of judgement. Sometimes you just wonder about the odd logic, or lack thereof, behind these decisions. If you have customers who are regularly transacting on their redraw, and then you suddenly lock them out with no warning, what do you expect the reaction will be??

 

[tech/a]

This was the setup they seem to have had.
I had 2 loans
(1) Line Of credit
(2) Business loan.

They had the Line of credit paying off the business loan!
I was over seas 18 mths ago when this was arranged.
It was only by chance I saw the Line of credit was getting bigger!
My Office manager didn't think that I had arranged anything different.
I certainly didn't arrange it! They couldn't or more to the point wouldn't
prove who made the arrangement but rectified it pronto and refunded
the interest.

 

[qldfrog]

As i noted initially, i think in ME bank case, it was triggered by a lack of refunding ability, and could point to a money flow seizure risk at least for the minor player.
I do not think ME bank was trying to get extra $ there, just emergency measure to save them
It will take a while to know the truth, if ever but i see that as an alarm bell for a financial crisis.we have an heath crisis triggering an economic one.
The next stage could be a financial one and this could be warning shots of stage 3..time will tell

 

[Knobby22]

As i noted initially, i think in ME bank case, it was triggered by a lack of refunding ability, and could point to a money flow seizure risk at least for the minor player.
I do not think ME bank was trying to get extra $ there, just emergency measure to save them
It will take a while to know the truth, if ever but i see that as an alarm bell for a financial crisis.we have an heath crisis triggering an economic one.
The next stage could be a financial one and this could be warning shots of stage 3..time will tell

I used to be with ME Bank when they were super cheap on home loans. Am now with CUA.
The Industry Super Funds refused to give them more capital so the loan rates rose and they were less competitive as they couldn't keep increasing their lending volumes.
So I expect that, as their capital is constrained, they couldn't handle too many of their clients redrawing on the offset account. I am pretty sure they still can as part of the loan but then it would take a few days and ME Bank could arrange finance.
But, yes, I am with you qldfrog, it is a warning shot.

 

[Bill M]

If I was with ME Bank and they did not give me full access to all my redraw facility then I would go to a mortgage broker and get them to organise a new mortgage for me with another bank or mortgage lender. No ifs, no buts, I'm out. No need to put up with this kind of nonsense.

 

[tech/a]

If I was with ME Bank and they did not give me full access to all my redraw facility then I would go to a mortgage broker and get them to organise a new mortgage for me with another bank or mortgage lender. No ifs, no buts, I'm out. No need to put up with this kind of nonsense.

100% agree.

I did exactly that and had 2 brokers all over us.
I didn't move because of the volume of work involved
Business/super/personal and the expediency
in sorting it.

 

[qldfrog]

I used to be with ME Bank when they were super cheap on home loans. Am now with CUA.
The Industry Super Funds refused to give them more capital so the loan rates rose and they were less competitive as they couldn't keep increasing their lending volumes.
So I expect that, as their capital is constrained, they couldn't handle too many of their clients redrawing on the offset account. I am pretty sure they still can as part of the loan but then it would take a few days and ME Bank could arrange finance.
But, yes, I am with you qldfrog, it is a warning shot.

100% with you
I also used to bank with Mecu: the CSIRO credit union, then merged into ME.They were not competitive or flexible so moved to CBA for a proper partnership 20y or so and closed my last account with them 5 or 6 y ago.but i have no special angst again them.
Just wanted to point this: I'm not in a personal vendetta even if i have no link with them anymore.

 

[Humid]

If I was with ME Bank and they did not give me full access to all my redraw facility then I would go to a mortgage broker and get them to organise a new mortgage for me with another bank or mortgage lender. No ifs, no buts, I'm out. No need to put up with this kind of nonsense.

I thought this the other day but then some people at the moment might not be in a strong position financially to make the shift

 

[Dona Ferentes]

Volte face

"ME Bank has reversed course on a controversial policy change to mortgage redraw facilities that left over 20,000 customers without access to cash and triggered an emergency response from the financial complaints ombudsman. ME Bank, which is owned by 26 union-backed super funds, changed a policy in late April that allowed customers to draw down on mortgage debt if they had made payments above the minimum required. Customers were not warned about the changes.

ME Bank on Friday released a statement to say it had abandoned the policy change. A dedicated hotline is now available for customers who would like their redraw limits changed back. "In response to customer feedback ME Bank has decided to change back home loan redraw limits for any customers who want it," the bank said.

"We are deeply sorry; we were trying to do the right thing but we went about it the wrong way," CEO Jaime McPhee said. “I would like to reassure customers that at no point did the bank ‘remove funds from customer accounts’ or ‘transfer’ any customer funds. Nor was the adjustment made for liquidity reasons. "Our priority now is to help, support and service our customers. We recognise that we need to do better, we can and we will."

In completely unrelated news, ME Bank has been called to appear at a parliamentary committee hearing next week to provide details about the nature of the relationship between the super funds and the bank.

https://www.smh.com.au/business/ban...edraw-policy-change-20200508-p54r2m.html?btis

 

[sptrawler]

I thought this the other day but then some people at the moment might not be in a strong position financially to make the shift

Jeez humid dont get soft, Im not in a strong financial position and you didnt give a ratz when it was going to be made worse, now you are sounding like you have empathy.lol

 

[sptrawler]

Volte face



In completely unrelated news, ME Bank has been called to appear at a parliamentary committee hearing next week to provide details about the nature of the relationship between the super funds and the bank.

https://www.smh.com.au/business/ban...edraw-policy-change-20200508-p54r2m.html?btis

That would have to be expected wouldnt it, in the current climate?
The big 4 have been dragged over the coals for not putting the customer first, have been fined, made to reserve more capital, made to reduce margins, had a bank specific tax applied, why wouldnt the minor banks be put under the microscope?

 

[Dona Ferentes]

“I would like to reassure customers that at no point did the bank ‘remove funds from customer accounts’ or ‘transfer’ any customer funds. Nor was the adjustment made for liquidity reasons."

https://www.smh.com.au/business/ban...edraw-policy-change-20200508-p54r2m.html?btis

So, what was the reason? A brainfart? Hubris? Contempt for the code of practice? Ignorance of legislative requirements? Or poor management practices?

 

[Bill M]

ME Bank on Friday released a statement to say it had abandoned the policy change. A dedicated hotline is now available for customers who would like their redraw limits changed back. "In response to customer feedback ME Bank has decided to change back home loan redraw limits for any customers who want it," the bank said.

It's not the first time banks have got things wrong. What really gets my goat is that they pay hundreds of thousands $$$$ to all these executives and all they had to do was just ask their customers for free to see what they thought. Could have all been avoided.

 

[sptrawler]

So, what was the reason? A brainfart? Hubris? Contempt for the code of practice? Ignorance of legislative requirements? Or poor management practices?

Probably blind faith, that the true believers, believe.
Which is not an unreasonable belief, when you read posts on the forum IMO.
It has been a common thread, that anything to do with industry super funds, is absolutely for the members and beyond reproach.
Which I hope is never found to be flawed, as it would be devastating IMO.

 

[Humid]

Jeez humid dont get soft, Im not in a strong financial position and you didnt give a ratz when it was going to be made worse, now you are sounding like you have empathy.lol

what are you dribbling about now

 

[sptrawler]

what are you dribbling about now

Just having a bit of a laugh on the inside humid, its nice to see the crosshairs on someone else, other than SMSF members like me.
By the way I might buy another bike tomorrow.lol

 

[Humid]

Buy one with a seat this time