CBBA financial planning complies with ASIC undertaking

CBA’s financial planning arm has finally complied with an enforceable undertaking slapped on it by regulators.

Commonwealth Bank chief executive Matt Comyn. Picture Kym Smith

Commonwealth Bank’s financial planning unit has finally complied with an enforceable undertaking slapped on it by the corporate regulator, even though customer refunds will continue to flow.

The Australian Securities & Investments Commission said on Tuesday it was satisfied that obligations under the court enforceable undertaking were complete and “finalised”. The compliance follows several twists and turns after CBA did not meet requirements in January, which spurred further action by ASIC.

On Tuesday, an ASIC statement said CBA would continue to pay customer refunds until September 30.

CBA attested that it made “material changes” to systems and processes in response to being embroiled in a scandal where banks were charging fees and not providing any service. Those systems could now track its obligations to customers, the bank said.

CBA and its rivals have been hit by customer remediation charges stemming from the Hayne royal commission which uncovered an array of poor practices.

In its March quarter update, CBA outlined another $714 million in customer repayments bringing its total royal commission remediation and program costs to $2.1 billion.

Tuesday’s ASIC statement noted that CBA financial planning had taken “reasonable steps” to identify and repay customers to whom it didn’t provide services between July 2015 and January 2018.

But ASIC came down hard on CBA in January this year when the bank failed to meet conditions of the enforceable undertaking. In early February, it ordered CBA financial planning to stop bringing on new customers and cease charging or receiving any ongoing service fees.

CBA completed that request two months later.

ASIC said its requests were completed by April and CBA has subsequently agreed to compensate customers charged fees during that period.

The regulator’s statement also said it would “continue to monitor” CBA’s moves to a new fee model that will see customers charged only after they have received a service.

A CBA statement reiterated that ASIC was staisfied it had met compliance obligations under the enforceable undertaking.

The bank also confirmed its new fee model but declined to specify when it would come into force.

“CFP (CBA financial planning) has stopped adding new on-going service customers and stopped charging on-going service fees,” the statement said. “The details of the new financial advice fee model are being worked through and further information will be communicated.”

As part of the enforceable undertaking EY Australia was required to provide an independent expert’s report on CBA’s progress.

The latest EY report said the financial planning arm had demonstrated a “step change” in how it responded to the undertaking since its earlier January 31 report.

“No material exceptions were identified,” EY said. “However, improvement opportunities and recommendations were provided to management which are in the process of being addressed.”