‘Do the right thing’: ASIC raises pressure on CBA over refund refusal

The corporate watchdog is urging the Commonwealth Bank to rethink its position on refunding fees paid by low-income customers, after the bank declined to pay further refunds following a regulatory probe into excessive fees.

In ramping up pressure on the country’s biggest bank, the Australian Securities and Investments Commission invoked the “pub test” often used in political debate, and warned it could consider taking court action.

On Tuesday ASIC said banks would refund $60 million to low-income customers receiving government concession payments who were in high-fee bank accounts despite being eligible for cheaper products.

ASIC chair Joe Longo (left) and commissioner Alan Kirkland urged CBA to rethink its stance on fee refunds.

ANZ Bank will pay an estimated $47.9 million in the latest round of refunds, followed by Westpac, which committed to paying back more than $9.9 million. National Australia Bank was not included in ASIC’s review because it has not charged dishonour, account-keeping or overdraw fees on transaction accounts since 2014.

Unlike Westpac and ANZ, CBA has declined to pay refunds over this issue, arguing the fees in question were disclosed to customers and charged in accordance with their terms and conditions. The bank, which has the most household customers of the big four, said its customers on government concession payments were a diverse group of people with varying levels of income, savings and property ownership.

In response, ASIC stepped up pressure on the bank on Tuesday. The regulator’s chair, Joe Longo, told the banking giant not to take a legalistic approach and warned that the watchdog could look at a more “court-based” approach if there was no improvement.

“If ASIC is compelled to revisit a court-based approach to solving that problem, then that’s a matter for the commission and we will look at that in time to come,” he said at a press conference in Sydney.

“But the real point for this morning’s purposes is that, is it really a good use of public resources to expect the regulator to go after a major bank on this kind of topic when every other major bank is doing the right thing?”

“I think our approach for today’s purposes is to say to CBA come on, reconsider your position, do the right thing. Don’t be legalistic.”

Longo did not provide further details when asked if ASIC had legal grounds to take court action against the bank if it refused to voluntarily pay refunds.

ASIC commissioner Alan Kirkland joined Longo in describing CBA’s decision as “very disappointing.”

“The CBA’s approach stands in stark contrast to those of the other banks, including ANZ, which has offered refunds of around $48 million. It is very clear what is the right thing for CBA to do by its customers, and they’ve now got an opportunity to reflect on how they stand relative to other banks and do the right thing,” he said.

When asked if the fees were unlawful or immoral, Kirkland replied: “These fees clearly don’t pass the pub test. It’s not acceptable in the community or in the eyes of ASIC for people who are on low incomes to be charged fees that are not right for them.”

Following ASIC’s comments, CBA released a new statement saying it would consider making some goodwill payments, but it reiterated the fees had been disclosed to customers and charged in line with terms and conditions.

“Where customers have incurred unusually high fees, we will consider goodwill adjustments where appropriate, while continuing to provide access to lower-fee options,” a bank spokeswoman said.

ASIC’s latest report on bank fees paid by customers receiving government concession payments builds on a report from last year, which focused on the harm of bank fees for low-income customers, including First Nations customers.

CBA pointed to $25 million it made in “goodwill payments” to Indigenous concession customer accounts in response to this earlier ASIC report.

In December, CBA caved in to public and political pressure and paused a controversial move that would have led to about 50,000 extra customers paying a $3 fee to withdraw cash from branches early in the new year.

The bank had faced intense backlash after announcing it would close 1 million Complete Access accounts and move those customers into its main transaction product, Smart Access. The Smart Access product includes $3 fee for an “assisted withdrawal”, such as those occurring through a branch or via telephone banking.

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