Macquarie Bank to pay $14m penalty over welcome rate promotion

Macquarie Bank is set to pay a $14 million court-imposed penalty after admitting to breaking the Corporations Act with its “welcome rate” promotions, according to The Guardian.

The penalty and the promotion

The Australian Securities and Investments Commission (Asic) alleged in NSW Supreme Court proceedings that Macquarie Bank described its savings offer as a “welcome variable rate” or “bonus” in promotional material in 2022, which could lead some customers to believe it was paid on top of the standard variable rate.

As interest rates increased that year, the gap between the welcome rate and the standard rate shrank. Once the standard rate overtook it, customers only received the standard rate with no bonus added, Asic alleged.

A Macquarie spokesperson said in a statement the bank will admit in court proceedings that it failed to provide financial services “efficiently, honestly and fairly”.

“Macquarie will not contest the proceeding and is expected to pay a $14m civil penalty,” the spokesperson said.

Regulator’s response

Asic commissioner Alan Kirkland said customers should not have to scrutinise every transaction to check their bank has paid the correct interest.

“Banks must get the basics right, which includes having systems and processes that deliver on the promises they make to customers,” Kirkland said.

“This wasn’t just unclear wording. Macquarie’s systems and controls were not rigorous enough to identify the risk that customers would misunderstand how the ‘welcome rate’ worked.”

Kirkland also said customers should not assume they are guaranteed the highest rate advertised by their bank.

“Higher advertised rates may only apply for a limited time or may depend on the customer meeting certain conditions,” Kirkland said.

“Consumers should check what conditions apply, whether they are meeting them and whether their bank is paying the interest rate they have been promised.”

Broader context

The competition regulator found in a 2023 study that 71% of bonus interest accounts failed to receive the bonus rate each month due to customers breaching the often opaque conditions.

Savers can be disqualified from earning the advertised rates when they do not make a deposit into their account each month or grow the balance. Some savings products also require customers to make no withdrawals.

Australia’s official interest rate is now at an 18-year high of 4.85% as elevated inflation persists, according to The Guardian.

Why it matters

The penalty is part of a crackdown by Asic over complex savings conditions that risk short-changing consumers grappling with the cost of living. The case highlights how small differences in promotional wording can affect what interest customers actually receive on their deposits.

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Sources

• theguardian.com: Macquarie Bank to pay $14m penalty after confusing ‘welcome rate’ promotion | Banking | The Guardian
• afr.com: Macquarie Bank fined $14 million penalty and must pay $8.8 million in compensation over confusing interest rate descriptions

This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.