Australia’s fee-for-no-service scandal is continuing to grow, with financial institutions forced to repay customers $260m after charging them ongoing fees without providing services.
The five biggest financial institutions – the Commonwealth Bank, NAB, Westpac, ANZ Bank, and AMP – have had to pay or offer customers $222.3m in refunds and interest for failing to provide personal advice to customers while charging ongoing advice fees in recent years.
This marks a further $6.4m in payments and offers from the “big five” since October last year.
The corporate regulator, the Australian Securities and Investments Commission (Asic), is also overseeing fees-for-no-service remediation programs by other licensees, including Bendigo Financial Planning Ltd, Police Financial Services Ltd (trading as BankVic), State Super Financial Services Australia Limited (trading as StatePlus), and Yellow Brick Road Wealth Management Pty Ltd.
The total amount now paid or offered to customers across both groups of licensees is $259.6m.
But Asic said the figure could grow as high as $850m if the total provisions set aside by the major banks for future remediation programs were paid in full.
The banking royal commission heard evidence for the second consecutive day from Paul Carter, the former executive general manager of wealth products for National Australia Bank/MLC.
Two weeks ago, NAB told the stock market that Nulis, a super trustee owned by NAB/MLC, would refund $67m to 305,000 super customers after admitting to charging them $220 each on average, plus interest, between 2012 and 2017. The fund failed to tell its customers they could opt out of paying the fee because it was linked to a service they may not be using.
Carter spent Tuesday morning answering questions about internal NAB deliberations about the best way to deal with the matter publicly.
In the afternoon, Nicole Smith, the former chair of Nulis, joined the witness box.
She admitted that NAB had a “probably poor” record of notifying Asic of any regulatory breaches before 2015.
Senior counsel assisting the royal commission, Michael Hodge, asked Smith why it had taken NAB nearly two years to repay customers after realising, in 2015, that it had been deducting plan service fees from customer accounts that had no linked advisers.
Hodge asked: “Would it seem obvious that in those circumstances those members would need to be refunded?”
Smith replied: “I would agree that where there’s no adviser, no service can be provided and a fee shouldn’t be charged.”
Hodge wanted to know why it took nearly two years to compensate customers, and Smith said it took that long to work out how many customers were affected.
Late in the afternoon, NAB’s legal team tried to prevent the commissioner, Kenneth Hayne, from publishing documents relating to NAB’s negotiations with Asic about the fees-for-no-service breach.
Neil Young QC, counsel to NAB, said: “The detriment to our client is that there would be unnecessary public revelation of the various concessions and compromises that my client was prepared to put forward in July 2016 in the context of this issue that had arisen with Asic.”
Re-dessiminated by The Asian Banker from The Guardian