ASIC lashes banks over fees for no service

The corporate watchdog has lashed six of Australia’s biggest financial institutions for ‘unreasonably’ delaying investigations.

The corporate watchdog has lashed six of Australia’s biggest financial institutions — AMP, ANZ, CBA, Macquarie, NAB and Westpac — for “unreasonably” delaying investigations into scandals in which they charged customers for services that were never provided.

Australian Securities & Investments Commissioner Danielle Press yesterday warned the six big players that the watchdog was looking forward to using new powers, agreed to by the government, that would allow it compel banks to put proper compensation programs in place.

Ms 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”.

The regulator yesterday issued a detailed report card on the failings of the institutions as part of its ongoing investigation of a fee-for-no-service scandal that is set to cost the wider financial services industry billions of dollars in compensation for cheated customers.

ASIC’s report card reveals that on December 18, CBA told it the bank would conduct a fresh review of whether it had reaped money for nothing from customers of three troubled financial planning divisions: Count Financial, Financial Wisdom and the Pathways division of Commonwealth Financial Planning. The regulator also revealed 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 on a method for figuring out which customers were diddled.

ASIC said the main reasons for the delays were poor record keeping, 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, and a “legalistic approach” to figuring out the services to which clients were entitled.

The reviews examined in ASIC’s report card cover potential fee-for-no-service rip-offs that are additional to ones that the institutions have already reported to ASIC since 2013, when the regulator first began to seriously examine the finance sector’s long-running habit of charging customers money but giving them nothing in return.

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

“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.”

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

It also showed ASIC lost patience with NAB during its investigation into a string of fee-for-no-service scandal, sending the bank a stinging letter titled “outline of suspected offending by the NAB Group” in October 2017 after the institution quibbled with it over wrongdoing at 10 subsidiaries.

ASIC’s detailed report card reveals that:

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

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

● CBA proposes looking back only six years, one less than ASIC’s standard of seven years, to determine whether Pathways customers need compensation;

● ASIC “strongly disagreed” with the approach to working out whether customers needed compensation proposed by Pathways, 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 time frame to complete the compensation program; and

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

An AMP spokeswoman yesterday said the company, which was heavily criticised during the banking royal commission, had “accelerated” its complex remediation program.

“Most remediation policies and approaches have now been agreed with the regulator,” she said.

A CBA spokesman said the bank had completed remediation for customers stung by advisers it employed, but not ones who worked in a network of non-staff or “aligned” financial planners.

“Our priority now is to work with our aligned planners and complete all remaining work,” he said.

NAB’s board “has expressed that these matters should have been handled better and faster”, a spokeswoman said.

She said that under Phil Chronican, who became interim chief executive at the start of the month after Andrew Thorburn departed due to criticism from Mr Hayne, “NAB has a renewed sense of urgency about the issues it confronts and is focused on customer outcomes”.

A Westpac spokesman said the bank agreed it was “unacceptable for customers to pay for a service they didn’t receive and we know we’ve got to get it done as quickly as possible”. “We intend to have completed the review of customers of our salaried advisers around mid this year,” he said.

ANZ and Macquarie declined to comment.