ANZ Bank will fork out $28.8 million to more than 390,000 account holders after it stung customers with fees for making payments between their accounts.
The 'significant breach' will see ANZ refund 376,570 regular account holders and 17,230 business account holders for failing to clearly disclose the fees surrounding its period payment product.
Periodic payments are an increasingly popular alternative to direct debits and allow account holders to set and forget fixed amount payments.
ANZ's terms and conditions define a periodical payment as a transaction "to another person or business".
However, ANZ charged fees on payments made between accounts held in the customer's own name.
The fees included non-payment fees charged on personal and business accounts when a period payment between the customers' own accounts did not proceed because of insufficient funds.
ANZ discovered the issue and reported itself to the Australian Securities and Investments Commission.
ASIC described the issue as a "significant breach of its (the bank's) financial services obligations".
"ASIC acknowledges the cooperative approach taken by ANZ in its handling of this matter, and its appropriate reporting of the matter to ASIC," the regulator said in a statement.
ANZ has commenced contacting affected customers to explain the impact and the reimbursement and expects to complete the remediation process by the end of September 2016.
ANZ group executive for Australia Fred Ohlsson said the bank had already begun making payments to its customers and expected all customers would be refunded by the end of September.
"I'd like to apologise to all our impacted customers for the concern that we know issues like this can cause," Mr Ohlsson said.
"When we identify an issue where we haven't got things right, we will make sure our customers are not left out of pocket."This story was first published at: http://www.smh.com.auAuthor: Sarah Danckert