The Commonwealth Bank of Australia (CBA) has blamed a programming error for approving personal account overdrafts applications that should have been rejected. As a result, the bank has been fined $180,000 by the Australian Securities & Investments Commission (ASIC) for violating responsible lending laws and has been forced to write off $2.5 million in loan balances. Here are the details.
Between July 2011 and September 2015, a programming error resulted in inaccurate calculations on whether a customer would be able to support overdrafts on their accounts. When assessing overdraft applications for personal accounts, the calculator didn't factor in housing and living expenses that customers had provided information for.
"As a result, this led to an over-estimation of the consumer's capacity to service the overdraft facility," ASIC said in a statement. "… 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."
Over 9577 applications for overdrafts that would have been declined under normal circumstances were approved and 1152 consumer were approved for higher than usual overdraft limits. CBA owned up to the mistake after an ASIC surveillance. The fault was discovered during an internal review.
CBA has said it will write off a total of approximately $2.5 million in personal overdraft balances.