The Royal Commission looking at Financial Services Misconduct heard today that the Commonwealth Bank’s automated system for approving overdrafts failed and so for four years from 2011 it gave some customers a line of credit they shouldn’t have received.
As a result, the volume of overdrafts rose significantly from 228,000 in 2012 (up 80% from the previous year) to 550,000 in 2014. The bank said its automated system “spat out” wrong approvals and was “doomed to fail” because of bad design. We discuss this in our latest video blog.
In fact, questions were raised by consumer advocacy groups before the bank released there was an issue. The implementation of serviceability assessments was not made correctly. As a result of changes made to the system, the bank failed its responsible lending obligations.
It was also slow to interact with the regulator on this issue. Once again, cultural and behavioural issues were in the spotlight.
The object lesson here is that automated credit decision systems can lead you up the garden path. This is important given the current rush to digital channels and more automation.
