News

NAB to halt penalty interest

By Country News

NAB customers in government-declared drought areas have received a reprieve, with the bank last week announcing it will no longer charge penalty interest to farmers who default on their loans.

Speaking at an event in Wagga Wagga last Monday, NAB chief executive officer Andrew Thorburn said the changes had come following the royal commission hearings into farm lending which revealed that in some cases the bank had ‘‘lost touch’’.

‘‘Such customers go through particular challenges and may fall into arrears and be unable to make their loan repayments. We want to help at this time, not make it more difficult,’’ Mr Thorburn said.

‘‘So, we will now not charge a higher default interest rate if this does occur.’’

The bank also announced it would allow eligible customers to offset their farm management deposit (FMD) accounts against their agricultural lending in the form of a discount to their lending interest rate — equivalent to an offset.

FMDs allow farmers to remove money from their taxable income during good years, to later use during tough times.

Federal Agriculture Minister David Littleproud welcomed the news, saying one in three farmers banked with NAB.

‘‘This is an investment in agriculture’s future and farmers can now vote with their wallets,’’ Mr Littleproud said.

‘‘I hope other Aussie banks follow NAB’s lead and get on board.

‘‘... It’s also an opportunity for the banking sector to reassess penalty interest as a whole because I don’t think the charge truly reflects the cost to the bank.

‘‘It’s really a kick in the guts when someone’s down, which isn’t the Australian way.’’