Fees-for-no-service hammer about to fall

ASIC’s first case in a looming crackdown on fees for no service is set to be up and running before the end of this month.

ASIC deputy chair Peter Kell leaves royal commission hearings in Melbourne. Pic: AAP

Remember last month when ASIC deputy chairman Peter Kell was lucky enough to appear before the financial services royal commission for a second time and took some questions about fees for no service?

We do. Kell used the occasion to dole out some extraordinary figures on the $1 billion-plus practice, which is so ubiquitous that it has acquired its own acronym (FFNS).

He then warned ominously that there was “a very high likelihood of proceedings commencing in the near future”.

That time is fast approaching, according to the word on the street.

In fact, the first legal case over FFNS is likely to be up and running before the end of the month, when royal commissioner Ken Hayne lodges his interim report.

From what we already know, the case will be the first of many.

As Kell helpfully told the royal commission on August 17, the probe has centred on 31 licensees, carried out 27 investigations and collected about 2.5 million documents.

The Big Four banks and AMP are still working out likely compensation figures, particularly for related licensees where the work was less advanced.

ASIC, Kell said, has considered sending criminal briefs to the Commonwealth Director of Public Prosecutions over the last five years, but so far enforcement action has been limited to bannings and enforceable undertakings.

“(But) there is a very high likelihood of proceedings commencing the near future,” he said.

One of the challenges that ASIC faces is the expiry of the six-year limitation period for civil action.

While Kell said he was unable to give a comprehensive answer on the issue, it was something that the watchdog has “firmly in mind”.

The other matter that’s exciting speculation in royal commission circles is the length of Hayne’s interim report.

The scope is limited to policy-related issues arising from the first four hearings on consumer lending, financial advice, loans to small and medium-sized businesses and financial services and regional and remote communities.

Again, the word on the street is that the seven-volume report is going to give the word “comprehensive” a whole new meaning.

Once the document is submitted to the Governor-General, it will be tabled in parliament and released to the public.

Submissions will then be accepted.