Westpac ‘compliance failures’ in six matters now put it at the top of ASIC bank court actions list

Westpac is now the most litigated bank in the nation after the financial regulator slapped six more proceedings over compliance failures, including charging fees to deceased customers.

Westpac is facing unprecedented legal action by ASIC. Picture: NCA NewsWire / John Gass

Westpac chief executive Peter King has set a “fix-it” date of 2023 for the bank as it agreed to pay fines totalling $113m for a litany of compliance failures, including charging fees to deceased customers.

The bank on Tuesday admitted allegations brought by the Australian Securities and Investments Commission in six Federal Court lawsuits for “widespread compliance failures” — including charging fees to 11,000 deceased customers over 10 years, charging fees for no service, and overcharging for insurance policies.

“Today’s sort of an important milestone because it’s six matters where we didn’t get it right.

“We’ve worked pretty hard over the last few months to find a way through the regulatory investigations and agreed facts and penalties that will go to the court,” Mr King told News Corp Australia on Tuesday.

“That’s going down the route of not a contested court process so that’s important for us given we didn’t do it right and we need to acknowledge that and then go to court and get us looking forward.”

Westpac is now facing a total of eight separate court proceedings from ASIC related to compliance failures — with the number of active cases in court brought by the regular this year making it the most litigated bank in the country.

Most of the proceedings relate to the Kenneth Hayne-led Royal Commission’s report on widespread, shocking failures by Australia’s financial giants released in February 2019.

On Tuesday, ASIC said it was taking “unprecedented action” in slapping six civil penalty proceedings against the bank simultaneously.

ASIC said the proceedings, each the result of an individual investigation, related to failures across multiple Westpac’s banking, superannuation and wealth management arms and its former general insurance business.

The lawsuits detail failures that saw Westpac charge fees for no service over 10 years to over 11,000 deceased customers, and distributed duplicate insurance policies to over 7000 customers.

It also charged members insurance premiums that included commission payments, despite a ban to do so under the Future of Financial Advice reforms; and charged ongoing contribution fees of more than $7m to at least 25,000 customers for financial advice without proper disclosure.

The bank allowed about 21,000 deregistered company accounts to remain open, charging fees and allowed funds to be withdrawn; and sold consumer credit card and flexi-loan debt to debt purchasers with incorrect interest rates, resulting in more than 16,000 customers who were likely to be in financial distress being overcharged interest.

ASIC said all matters, excluding debt on-sale and insurance in super, Westpac “failed to ensure that its financial services were provided efficiently, honestly and fairly”.

ASIC and Westpac will jointly submit to the court that combined penalties of $113m, and a further $80m in remediation to customers are appropriate. Each matter will now be separately considered and determined by the court.

The agreed settlement is largely in line with provisions already set aside on Westpac’s balance sheet.

ASIC deputy chair Sarah Court is disappointed to have to commence legal proceedings again.

Meanwhile, Westpac and/or the debt purchasers have refunded over $17m to affected customers.

On Tuesday, Mr King said he has a fix-it date of 2023 for the group to become a simpler, less complex banking business, rid of its mistakes-riddled wealth arms.

He said Westpac had fallen “short of our standards and the standards our customers expect of us” in each of the matters.

“The issues raised in these matters should not have occurred, and our processes, systems and monitoring should have been better. We are putting things right and unreservedly apologise to our customers,” Mr King said.

“Broadly 2021 was about getting the foundations right, designed well. 2022 and 2023 is about implementing and embedding those changes.

“We can see progress this year in the fact that we have resolved most of the issues in financial crime in the AUSTRAC matter.

“Majority of the issues today were in the wealth businesses so general insurance, financial planning and superannuation. They are the businesses that we’ve decided that they are better off with different owners.”

He said many of the ASIC investigations were self-reported, the majority of affected customers have been compensated, and any remaining payments will be completed as quickly as possible.

Westpac businesses under fire include Westpac Banking Corporation, Advance Asset Management Limited, Asgard Capital Management Limited, BT Funds Management Limited, BT Funds Management No. 2 Limited, BT Portfolio Services Limited, Securitor Financial Group and Magnitude Group.

ASIC’s action comes less than a week after Westpac’s NZ board was found to have ‘material shortcomings’.

Primed to take over as the next chairman of the Australian Banking Association, Mr King said many of the banks had moved out of wealth.

“I think that means we’re focused back on banking. It’s a simpler portfolio, we can do it well and meet our promises to customers more consistently.”

In separate, ongoing lawsuits, Westpac is also facing ASIC in court for alleged insider trading, unconscionable conduct and breaches of its Australian financial services licensee obligations in relation to a $12bn interest rate swap transaction with a consortium of AustralianSuper and a group of IFM entities.

Another ongoing court matter relates to alleged misleading and unfair sales of consumer credit insurance.

Meanwhile, ASIC is suing CBA for alleged misleading conduct over monthly access fees and in a separate matter, has pleaded guilty to criminal charges for mis-selling consumer credit insurance.

ANZ is being sued for its ‘introducer program’ home loan referrals while NAB is facing two court actions for alleged unconscionable conduct and misrepresentations over account fees and for fees for no service and fee disclosure statement failures.

AMP is also in court on two matters – for charging deceased customers and for fees for no service charged on corporate superannuation accounts.

“ASIC is disappointed to have to yet again commence legal proceedings, on this occasion no fewer than six times, against a major bank,” ASIC deputy chair Sarah Court said on Tuesday.

“The conduct and breaches alleged in these proceedings caused widespread consumer harm and ranged across Westpac’s everyday banking, financial advice, superannuation and insurance businesses.

“A common aspect across these matters has been poor systems, poor processes and poor governance, which is suggestive of an overall poor compliance culture within Westpac at the relevant time.”

She said it was “unprecedented” for ASIC to file multiple proceedings against the same respondent at the same time.

“However, these were exceptional circumstances.

“ASIC had numerous Westpac-related matters under investigation through the course of 2021, and we decided to expedite those matters for consideration by the Court at the earliest opportunity.”

Earlier this month, Westpac reported poor margin performance by its key home-lending business, generating scepticism it will achieve its much-trumpeted $8bn cost base in 2024.

The group reported a 138 per cent increase in net profit to $5.5bn, mainly driven by lower notable items and a $3.8bn turnaround in impairment charges to a $590m benefit.

Westpac CEO Peter King said the bank is “working to resolve” the issues Picture: Jonathan Ng