ME Bank scrambles in face of redraw reduction controversy
Industry superannuation funds-backed bank, ME Bank, has run into a wall of negative publicity and criticism after it appeared to unilaterally reduce clients’ mortgage positions by reducing their drawdown facilities.
Newspaper reports over the weekend saw ME Bank being heavily criticised for having made the move without appearing to have first contacted to client to inform of them.
In an explanation issued on Saturday, ME identified claimed it had undertaken the move to help some customers and prevent them from falling behind on their original repayment schedules.
“…the redraw facility on some legacy home loans could lead to some customers falling behind their original repayment schedules,” it said. “The redraw facility gives customers access to payments that they have made ahead of their repayment schedule.
“By not reducing the available redraw amount over time, customers could overuse the redraw to a point where they could fall behind their original repayment schedule. This can put customers at risk of not meeting their repayment commitments, potentially leaving them open to financial hardship at the end of the loan term.
“No money has been removed from customer accounts. The adjustment made is to the amount available for redraw,” the bank’s explanation said.
“We understand that the change has caused concern to some customers, particularly in the current environment. We are reviewing the personal circumstances of each customer affected and are committed to working with them to determine how we can help with their individual financial needs.”
The bank said it was in the process of contacting affected customers to see if any support was required and offering options such as rearranging financing at the Bank’s cost for customers whose redraw limits have been reduced and offering customers access to the three and six month repayment holidays.
Recommended for you
The Stockbrokers and Investment Advisers Association has announced the appointment of its new chief executive following the exit of Judith Fox after six years.
While SMAs may boost adviser efficiency, an adviser has suggested that widespread use could leave some clients in a worse position while also reducing the individuality of their service.
Three advice firms – Talem, Assure and Plenary Wealth – have merged to create a Sydney-based advice business.
Sophie Chen has begun her role as executive director at Sequoia Financial Group, responsible for implementing the firm's strategy in Asia-Pacific as the group looks to cross-border partnerships.
