National Australia Bank (NAB) has been handed a $2.1 million fine, in addition to court costs to the competition regulator, after it was found last year by the Federal Court to have charged periodic payment fees more than 18 months after it became aware of the overcharges.

ASIC deputy chair Sarah Court said the bank had continued to charge fees even after “it knew it lacked any entitlement to do so” and furthermore “omitted to tell its customers of that wrongful charging”.

Between January 2017 and July 2018, NAB was found to have wrongfully charged periodic payment fees on more than 74,500 occasions totalling $139,845.

More than 2,800 personal banking customers and 500 business banking customers were affected.

Court slammed the bank’s tardy response to the error, noting “it took NAB over two years to stop charging these incorrect fees”.

ASIC labelled the misconduct as “clearly unacceptable”.

The Federal Court Justice Sarah Derrington deemed the relatively modest fine “wholly inadequate” given, she said, “the nature of NAB’s conduct, especially its disregard of its customers’ rights over an extended period of time”.

She added in her judgement: “In a context where NAB has been a repeat offender against the financial services legislation in this country and, as this case and others reveal, it appears to place a low priority on respecting the legal rights of its customers, a penalty several times the statutory maximum would have been far more appropriate.”

However, the Court conceded that the fine was the maximum that the legislation, as it existed at the time of the contravening conduct, could permit it to impose.

While the Federal Court found that NAB did not breach a key obligation under the Corporations Act (that is, “to do all things necessary” to ensure services are provided “efficiently, honestly and fairly” – which is part of clause 912A), NAB’s defective systems were found to be “inadequate to allow it to meet its commitments to its customers”.

The court did in its 2022 judgement, however, find NAB in contravention of 12CB(1) of the Australian Securities and Investments Commission Act 2001.

Justice Derrington said the bank had engaged in conduct that “unjustifiably advanced its self-interest whilst knowing that its customers were oblivious to the wrongful charging that was taking place”.

“It deliberately and cynically took advantage of its customers’ unawareness, and was prepared to allow the overcharging to continue whilst it searched, admittedly in good faith, but without any great diligence, for a solution.”

“Such moral dereliction would seem to reflect an inherent sense of entitlement, possibly precipitated by a view that no real harm would come to the bank even if its conduct was detected.”

Since the regulatory breach, the regulator noted that the ASIC Act has been updated, since March 2019, to permit the imposition of a substantially higher penalty.

The penalty for unconscionable conduct in breach of the ASIC Act is now at least $15.65 million.

The cause of the wrongful charging was found to be a computer systems error. The Court further contended that NAB appeared “[unwilling] to apply sufficient resources to remedy the problem in a timely manner”.

Whilst acknowledging that the bank had promptly investigated these issues once they were identified, it found that the bank was ultimately “unable to determine how to remedy the system’s dysfunctionality, short of shutting it down altogether”.

NAB did so – however, this was at least 18 months after the overcharging was identified.