Banks pay $1.24 billion in compensation for scandals

Six of Australia’s largest banking and financial services institutions have paid or offered a total of $1.24 billion in compensation, as at 31 December 2020.

NAB has paid out $437.5m for its part in the fees-for-no-service scandal. Picture: NCA NewsWire

Compensation payments and offers made to customers for poor advice and no service by six of the nation’s top financial institutions have surged to $1.24bn, with an additional $193m paid in the last six months alone.

The total amount, which includes payments and offers made by the four major banks as well as AMP and Macquarie Group, take no account of the vast sums paid by the ­institutions to set up their remediation programs.

National Australia Bank has paid out the most compensation since the corporate regulator began cracking down on this more than five years ago, with $437.5m in payouts for its part in the fees-for-no-service scandal.

At least 636,205 customers were identified as hit by the bank’s misconduct.

The bank has also paid $66.8m to 1956 customers identified as having fallen victim to the bank’s non-compliant advice.

The Australian Securities & Investments Commission, which is updating the figures every six months, conducted two major reviews in 2015 which led to the review and remediation programs.

The regulator found in 2016 that there had been systematic failures in the advice divisions of AMP, ANZ, Commonwealth Bank and NAB, as well as some of their product issuers.

These included the failure to ensure provision of ongoing advice services to customers who had paid fees to receive the services, failure by advisers to provide the services, and failure by product issuers to switch off the advice fees charged to customers who did not have a financial adviser.

Westpac was next in line for the highest payments offered to customers, hit by fees-for-no-service, with more than $199.2m offered or paid.

The bank identified 44,590 customers who were wrongly charged. The bank has also been forced to pay $42.34m for non-compliant advice to 2111 ­customers.

Commonwealth Bank has paid $168.28m for the bank’s failures in the fees-for-no-service scandals.

At least 56,438 CBA customers were picked up by reviews. The bank has also paid $9.35m to 626 customers who were wrongly offered non-compliant advice.

This was followed by AMP, which has been hit by a string of scandals in recent years, and reported to have paid $153.78m for fees-for-no-service. AMP identified 207,044 customer accounts having been wrongly charged.

The extent of the fee-for-no-service scandal triggered a management implosion at AMP during the Hayne royal commission three years ago, with the ­financial services giant struggling to recover.

The financial institution was also found to have wrongly provided advice to 2289 customers.

AMP has paid more than $33.88m to these affected ­customers.

ANZ, which was identified as having wrongly charged fees to 207,044 customers has paid out $153.78m.

Four court cases have now been lodged after the Hayne financial services royal commission found there was an industry-wide fees-for-no-service scandal.

Reviews into ANZ’s scandals, which arose from the bank’s Aligned Dealer Groups, comprising the Millennium3 Financial Services, RI Advice and Financial Services Partners, will be pursued by IOOF which bought the groups in 2018.

ANZ has also paid $43.18m to customers for non-compliant advice. The bank found at least 2066 customers had been incorrectly provided non-compliant advice over several years.

AMP, ANZ, CBA, Macquarie, NAB, and Westpac have paid out after two regulatory reviews into the scandals.

Reviews into the scandals have identified almost a million Australians who were wrongfully slugged by the banks.

However, the Australian Securities and Investments Commission notes the banks do not hold consistent data for all the numbers of individuals remediated.