Thousands overcharged by Custom Credit
Customers of defunct National Australia Bank subsidiary Custom Credit were overcharged thousands of dollars in illegal over-payments and fees on personal loans in the late 1980s. And most of these customers won't get their money back.
A liquidator discovered the major flaw, which could have cost the company millions of dollars in refunds, but the 12-year gap between the time the customers were overcharged and when the flaw was made public means that thousands of people won't be able to prove their cases.
A Queensland Court has found that Custom Credit's contracts did not allow consumers to get refunds on insurance premiums when they refinanced their loans or paid them out early. In 1994, management of Custom Credit was told the practice was illegal. Customers were entitled to refunds of all interest, fees and charges paid out over the life of a loan, under the new Credit Act, if their contracts contained this error.
Custom Credit's liquidators sent letters to 9,038 former customers, but only 788 responded and $131,000 in insurance rebates was paid. Judge Fryberg was very critical of Custom Credit taking 12 years to act on the known flaw in its system, and he ordered that $300,000 be paid into the Consumer Credit Fund. Queensland's Fair Trading Minister, Merri Rose, said that many customers had not kept records and missed out because the company took 12 years to admit the fault.