Senate to Scrutinise Banks After $55m in Offset Failures
A Senate inquiry will examine how mortgage offset-account failures cost borrowers millions and whether ASIC's enforcement response has been adequate.
A new Senate inquiry will force Australia's major banks to account for mortgage offset-account failures that left borrowers paying more interest than they should have, following an ASIC investigation that found widespread problems in how offset accounts were set up, linked and monitored.
The Adviser reports that the Senate Economics References Committee will examine the failures after shadow housing minister Senator Andrew Bragg announced the inquiry, with a dual purpose: to scrutinise how offset accounts were managed across the banking sector, and to test whether the Australian Securities and Investments Commission (ASIC) is imposing adequate consequences when consumer harm emerges. Banks have already paid more than $55 million in compensation for offset-account failures identified in ASIC reports spanning the period from 1 September 2023 to 31 August 2025. The committee is due to report by 7 June 2027.
What went wrong with offset accounts
An offset account reduces the interest charged on your home loan by offsetting your deposit balance against your loan principal. If your mortgage balance is $500,000 and you hold $60,000 in a linked offset account, you pay interest only on $440,000. When the account is not properly established or linked, none of that offset applies – and you pay interest on the full $500,000 without realising the account is failing to do its job.
ASIC's review of eight lenders found this was happening with troubling regularity. Accounts were frequently not established, linked or overseen correctly by the institutions managing them. The $55 million in compensation payments provides a partial measure of the scale, though Bragg argued that the inquiry's more important question was whether banks and the regulator had responded sufficiently to what he characterised as a serious, systemic consumer issue.
It's not good enough for a major scandal like this to be unearthed by the financial regulators and for that to be the end of it, Bragg said.
The inquiry will investigate how offset accounts are set up, how errors are identified, the processes used to remedy failures, and how affected customers are compensated. It will also examine the impact of failures on borrowers' interest costs and repayments over time, and consider the costs and benefits of offset accounts as a product class.
Bank CEOs in the spotlight as enforcement record is challenged
Bragg made clear that the inquiry would not stop at operational-level reviews. He said major lenders should be required to account for failures affecting mortgage customers and that their chief executives should be called before the committee. The major banks are not above reproach. We expect to hear from their top brass. Australians should not be left paying more interest because an offset account was not properly established, linked or managed, Bragg said.
Beyond the offset issue, the senator used the announcement to challenge ASIC's broader enforcement track record. He pointed to what he described as a significant decline in ASIC referrals to the Director of Public Prosecutions over recent years. I don't think you can seriously argue, when you look at the DPP figures and the number of referrals, where referrals from ASIC have almost halved over the past half decade, that the corporate cop is doing the work it should be doing, Bragg said. There is no way that white collar crime in Australia has just gone away.
Bragg drew on the collapses of First Guardian, Shield and Lion to argue that regulators need to act faster when credible warnings arise. All these people who have lost significant sums of money, often through fraud, thought they were living in a country where the rule of law would be strongly enforced and the regulator would come in quickly and act, he said.
On penalties, Bragg argued that existing consequences are disproportionately lenient relative to the scale of harm. There have been terrible consequences for people when things happened, but what we don't see is prosecutions, incarceration or fines which are big enough to be more substantial than just speeding tickets for these institutions, he said.
Bragg acknowledged the value of ASIC's research work, but said it needed to be paired with stronger action where consumer interests had been significantly damaged. It's all well and good for the corporate cop to go and do research into offset accounts and put out papers and the like. That's helpful. But what really matters is establishing a precedent where, if you break the law and you damage consumer interests significantly, then you will be facing serious penalties – the executives of the banks will be facing penalties. That is not the situation we have today, Bragg said.
What offset-account holders should do right now
If you have a mortgage offset account, this inquiry is a practical prompt to verify that it is actually working as it should. Contact your lender and ask for written confirmation that your offset account is correctly linked to your home loan. Request a history of your loan balance and offset balance to check that the offset has been applied as expected.
If you have been paying interest on the full loan balance for a period during which your offset account held a meaningful balance, you may be entitled to a refund of the excess interest charged. ASIC's findings make clear that this is a documented, industry-wide issue – not a rare edge case affecting a handful of customers.
For borrowers who are uncertain whether their current loan and offset structure is still the right fit, comparing home loan options across lenders is a sound starting point. If you want to model what a properly functioning offset account would actually save you each month and over the full loan term, our repayment calculator lets you run those numbers before making any decisions.
The committee's report is due in June 2027. But borrowers don't need to wait for a Senate outcome to act on what ASIC has already found. Check your account today – and if something doesn't look right, raise it with your lender directly.