ME Bank has slashed the amount an estimated 20,000 customers can redraw from their home loans by thousands of dollars, drawing outrage from borrowers hoping to use the money during the coronavirus crisis.
A spokesman for the bank, which is owned by a group of industry super funds, said it made the move after figuring out that “the redraw facility of some legacy home loans could lead to some customers falling behind their original repayment schedules”.
Home loan redraw facilities allow borrowers to make extra mortgage payments and either use the money to pay off their loan quicker or draw down cash later on.
Customers who have flooded the bank’s Facebook page with complaints appeared to have been caught by surprise by the move.
“The money we lost is actually my husband’s redundancy payment as he was retrenched last week,” one customer, said in a post to the page last week.
The customer said her redraw limit had been slashed by “over $16,000”.
“We are not eligible for Centrelink payments and were relying on those funds to get us through,” she said.
Another said his limit had been slashed by $20,000 with “no notice”.
“Actually no communication at all,” he said.
“Lucky I am not relying on that amount for future purchases, but how would you know that? I have been a loyal customer for over 20 years, and am well ahead of required payments.”
Some customers said they had taken their grievances to the Australian Financial Complaints Authority. An AFCA spokesman said the authority could not comment on specific cases.
ME Bank did not respond to questions about when it discovered the problem, when it made the change or what the typical reduction in redraw was.
Its spokesman said about 4% of home loan customers were affected by the change. This equates to a little over 20,000 loans, based on home loan numbers disclosed in the bank’s most recent annual report.
“ME is in the process of contacting affected customers,” the spokesman 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.
“We are reviewing the personal circumstances of each customer affected and are committed to working with them to determine how we can help customers with their individual financial needs.
“For customers whose limits have been reduced, the bank will look to rearrange financing at the bank’s cost.”
He said home loan customers in difficulty could apply for a three- or six-month deferment of repayments as part of the federal government’s coronavirus relief package.
