Fees for no service: Corporate cop attacks ‘unreasonable’ big banks

Australia’s big banks have received yet another bollocking, this time for being “unreasonable” by trying to delay investigations into their fees-for-no-service scandals.

Banks have been “unreasonably” delaying investigations into their fees-for-no-service scandals, the corporate cop says.

The corporate watchdog has lashed Australia’s biggest financial institutions for “unreasonably” delaying investigations into scandals where they charged customers for services they never provided.

The Australian Securities and Investments Commission has warned the six big players — AMP, ANZ, the Commonwealth Bank, Macquarie, National Australia Bank and Westpac — that it is looking forward to using new powers agreed to by the federal government.

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Those powers would enable ASIC to compel banks to put proper compensation programs in place.

The regulator yesterday issued a detailed report card on the failings of the institutions.

It reveals its concerns over inadequate compensation schemes at ANZ and Macquarie, a “fundamental disagreement” with the CBA over evidence gathering, and that NAB subsidiary JBWere has so far not even agreed a method for working out which customers were dudded.

ASIC commissioner Danielle Press. Picture: David Crosling

Commissioner Danielle Press said the institutions “have failed to sufficiently prioritise and resource their reviews, particularly as ASIC advised them to commence the reviews in mid-2015 or early 2016”.

Key reasons for the delays were poor record keeping and a failure by some of the institutions to put forward remediation schemes that properly identified and compensated customers hit by the fee-for-no-services scandals.

Another main reason included a “legalistic approach” to figuring out the services to which clients were entitled, ASIC said.

The reviews cover potential fee-for-no-service rip-offs that are additional to those the institutions have reported to ASIC since 2013.

That was when the regulator first began to seriously examine the finance sector’s long-running habit of charging customers but giving them nothing in return.

Together, the six institutions have so far paid or offered $350 million in compensation and expect to shell out a total of about $800 million once the new reviews are finally complete.

The six companies have so far forked out or offered $350 million in compensation.

“These reviews have been unreasonably delayed,” Ms Press said.

“ASIC acknowledges that they are large-scale reviews — they relate to systemic failures over long periods, with reviews going back six to 10 years, and cover 36 licensees from the six institutions that currently authorise more than 7000 advisers.”

ASIC’s detailed report card reveals:

■ AMP is yet to propose a method for reviewing the files of advisers who have left the company, while a review of current and former advisers is not due to be complete until mid 2021;

■ ANZ has not given ASIC any timeframe for completing its additional investigations and proposes paying interest on compensation at a lower rate than the regulator’s benchmark;

■ The CBA proposes looking back only six years — one year less than ASIC’s standard of seven years — to determine whether victims of the Pathways division of its Commonwealth Financial Planning business need compensation;

■ ASIC “strongly disagreed” with the approach to working out whether customers needed compensation proposed by Pathways and two other CBA divisions, Count Financial and Financial Wisdom;

■ Macquarie proposes paying interest on compensation at a lower rate than ASIC’s benchmark;

■ NAB’s JBWere has yet to agree with ASIC on a period of time over which customer files should be reviewed, has not proposed a method for working out remediation and has not given the regulator a timeframe to complete the compensation program; and,

■ Westpac has not yet provided a compensation methodology or timeframe to complete its review of advisers at two businesses, Magnitude and Securitor.

The financial services royal commission exposed additional fee-for-no-service scandals, including thousands of cases where AMP, the CBA and NAB had charged dead people.