'Repeat offender' NAB fined $2.1 million over unauthorised fees

National Australia Bank has been ordered to pay a $2.1 million penalty for charging customers incorrect fees - with the judge calling the fine "wholly inadequate" and lamenting it couldn't be more.

Federal Court Justice Roger Derrington wrote in an order on Friday that NAB continued to charge the fees for recurring payments from January 2017 until July 2018 even though it knew it had no contractual entitlement to do so.

"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," Derrington wrote.

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Periodical payment fees amounting to $139,845.90 were charged on 74,593 occasions on 2888 personal banking and 513 business banking customers during the 18-month period.

The fees were actually incorrectly charged dating back to 2007, but Derrington wrote that NAB became aware of them in late 2016.

The issue stemmed from human error when the automated payments were set up by NAB staff.

Some customers were entitled to a fee exemption but did not receive one, while others were charged a fee of $5.30 when the correct fee was $1.80.

"While NAB promptly set up internal investigations into these issues, which continued over time and eventually ascertained the identity of the persons adversely affected by its errant system, it was unable to determine how to remedy the system's dysfunctionality, short of shutting it down altogether," Derrington wrote.

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Eventually, in July 2018, NAB ceased charging periodical payments fees on all accounts.

"In the preceding period of more than 18 months, NAB obviously prioritised the preservation of its own commercial position over its duties to its customers," Justice Derrington wrote.

Asked for comment, a NAB spokesman repeated a statement from July that apologised.

"We have completed a remediation program to set things right and repaid more than $8.3 million of fees plus interest to affected customers," the statement said.

ASIC had claimed that NAB was liable for a penalty for each of the 74,593 incorrect fees, meaning the maximum penalty could top $130 billion, but Justice Derrington found the bank only liable for a single violation.