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The corporate regulator has slammed Australia's major banks for failing to complete further investigations into fees charged to customers who did not receive the services they paid for.
Key points:
- ASIC says financial institutions have failed to properly prioritise and resource their reviews into fees for no service
- The big four banks and AMP are expected to pay more than $1.15 billion in compensation
- AMP agrees to pay ASIC's legal costs and end a court battle with the regulator over documents related to the scandal
The fees-for-no-service scandal was like "taking money for nothing", banking royal commissioner Kenneth Hayne said.
The scandal included customers being charged ongoing fees by financial advisers — despite not even receiving a yearly review — as well as charges to accounts after customers had died.
Today, ASIC said the big four banks and AMP expected to pay more than $1.15 billion in compensation, including about $350 million already paid or offered to customers.
The total compensation bill could rise as the institutions have not yet completed their reviews into the full scope of fees for no service beyond the instances already reported to ASIC since 2013.
The corporate regulator said the delay was unreasonable.
"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 7,000 advisers," ASIC commissioner Danielle Press said.
"However, we believe the institutions have failed to sufficiently prioritise and resource their reviews."
Ms Press said the delays were down to poor record-keeping and systems, a failure to meet ASIC's expectations of how customers should be identified and compensated and an overly legalistic approach by some banks.
The regulator released detailed report cards calling out the failings of the individual institutions.
AMP estimates it will complete its review and the resulting compensation in the second half of 2021, but is yet to provide details for how it will deal with financial advisers who have left the firm.
"We continue to work closely with ASIC on the ongoing implementation of the program. Most remediation policies and approaches have now been agreed with the regulator," AMP said in a statement.
ANZ did not provide any estimated time frame.
Macquarie expects to wrap up its remediation program mid year, but ASIC is unhappy with the rate it is proposing to pay customers to compensate for lost earnings.
NAB and Westpac were each called out for failing to provide an estimated completion date or methodology for the review of some of their subsidiaries.
The Commonwealth Bank completed its reviews but now intends to undertake another.
For a number of divisions, the review will cover a shorter period than the seven-year time frame recommended by ASIC.
"We recognise this is important to complete in an efficient and timely manner for customers and to date we've done this for our salaried advisers. Our priority now is to work with our aligned planners and complete all remaining work," CBA said in a statement.
The regulator also confirmed that its own investigations were ongoing and said it planned to "take enforcement action against licensees that have engaged in misconduct".
In the banking royal commission's final report, Mr Hayne said he had informed ASIC in November that at least two entities may have broken the law by engaging in dishonest conduct by charging fees for no service, and "invited" the regulator to consider whether it should begin criminal or other legal proceedings.
The commissioner singled out former NAB chief executive Andrew Thorburn for treating fees for no service as "nothing more than carelessness combined with system deficiencies" in a damning assessment that cost him his job within the week.
ASIC commenced proceedings against NAB's superannuation trustees NULIS and MLC Nominees in September, alleging $100 million in fees were wrongly charged to hundreds of thousands of fund members.
"Under the leadership of [interim chief executive] Philip Chronican, NAB has a renewed sense of urgency about the issues it confronts and is focused on customer outcomes," the bank said in a statement in response to ASIC's fees-for-no-service report card.
Clayton Utz hands over AMP documents
But there is one court battle ASIC no longer has to fight.
The Federal Court dismissed proceedings brought against AMP and law firm Clayton Utz, after the latter handed over internal file notes to the regulator.
ASIC launched the legal action in December in an attempt to force AMP to produce documents related to its handling of the fees-for-no-service scandal.
During the banking royal commission, AMP admitted to misleading ASIC over fees charged to thousands of customers.
Clayton Utz was hired to produce an independent report into the scandal but the commission heard evidence of emails and drafts exchanged between the parties.
AMP claimed interviews conducted by Clayton Utz with AMP staff were subject to legal professional privilege.
However, ASIC said the law firm handed over the file notes of the interviews late last week and AMP had agreed to pay ASIC's costs.
"ASIC is pleased that the documents have now been produced but is disappointed that the matter was not resolved sooner," ASIC deputy chair Daniel Crennan QC said.
Last month, lawyers for ASIC told the court the regulator was considering proceedings against AMP executives.
Topics: banking, business-economics-and-finance, regulation, australia
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