Westpac has committed to pay a total of $11 million in compensation to customers who held one of 13,000 owner-occupier, interest-only home loans affected by a mortgage processing error.
The error led to those customers continuing to make interest-only repayments on their loans, instead of being switched to principal and interest repayments at the end of their interest-only period.
The bank said the mistake predominantly affects loans with an interest-only period that expired between 2009 and 2016.
Westpac said it will start contacting affected owner-occupier customers from today and it expects the remediation process will take about 12 months to complete.
In a statement to the Australian Securities Exchange, Westpac revealed it notified the corporate regulator, the Australian Securities and Investments Commission (ASIC), when the error was identified and worked closely with it on how to respond to the mistake.
The bank said loans through its subsidiaries — St George, Bank of Melbourne, Bank SA and RAMS — are not affected.
Westpac has apologised for the glitch.
“We want our customers to have confidence that if we get something wrong, we acknowledge it and put it right,” the bank’s chief executive of consumer banking, George Frazis, said.
“We apologise unreservedly for the error and have now automated the switching process to ensure it does not happen again.
“Importantly, customers don’t need to do anything. We are contacting customers proactively and will provide compensation to anyone who we believe has been financially disadvantaged.”
Accounting firm Deloitte has been engaged to assess Westpac’s approach.
The bank has established a dedicated customer service line for customers with any queries on 1300 132 925.