Banks slammed for fee-for-no-service compo delays

ASIC has accused six major institutions of “unreasonably” delaying probes into fee-for-no-service scandals.

ASIC has released a detailed report card into the failings of major institutions. Pic: AAP

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

Australian Securities and Investments Commissioner Danielle Press today warned the six big players that it 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.

The regulator has today issued a detailed report card on the failings of the institutions that 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 figuring out which customers were dudded.

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”.

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, ASIC said.

The reviews cover potential fee-for-no-service ripoffs 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 scandals, 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, while 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 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 time frame to complete the compensation program;

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