NAB faces a bill of well over $100 million after the financial regulator launched legal action against its superannuation arm over the infamous ‘fees for no service’ scandal.
The news broke on Thursday night that watchdog ASIC had filed a case with the Federal Court accusing NAB trustees of failing in their duty to protect retirement savers.
NAB subsidiaries deducted about $100 million in fees from super fund members for financial advice without actually providing them the advice, ASIC alleged in court documents.
NAB risks substantial financial penalties if found to have breached the law – in addition to a compensation bill for affected customers estimated to already exceed $120 million.
The regulator is pushing for fines despite the compensation.
“Irrespective of the remediation, the conduct of the trustees did not promote confident and informed decision-making by retail clients,” ASIC wrote in one of the court documents.
“Further, it promoted inefficiencies in the operation of Australia’s regulated and taxpayer-supported superannuation arrangements, thereby exposing the wider Australian public to financial detriment as well as eroding consumer trust and confidence in the efficient administration of superannuation funds to the detriment of the wider industry.”
The superannuation scandal, known colloquially as ‘fees for no service’ because retirement savers allegedly paid fees and got nothing in return, has dominated the banking royal commission.
An ASIC spokesperson confirmed to The New Daily the case was “well and truly under way” and “well advanced” before the commission began.
The broad accusations against NAB’s subsidiaries are breach of trust; failures to provide financial services efficiently, honestly and fairly; failure to comply with financial services law; and misleading, deceptive and false conduct. All relate to the allegedly illegal charging of roughly $100 million in fees.
Curiously, NAB was the only big bank not to hike its home loan rates in recent days.
The bank has so far not responded publicly to the court case.
In recent weeks, the Hayne royal commission heard explosive evidence that NAB knew as early as mid-2016 that it had been charging fees for no service. But it did not disclose the full figure of its own estimate of liability to the regulator for several months.
ASIC’s case relates to the TUSS Fund, overseen by trustee MLC Nominees, and the MLC Super Fund, with its trustee NULIS.
By law, superannuation trustees have a duty to protect retirement savers and act in their best interests.
Members were charged a yearly fee of up to 0.44 per cent for the financial advice they, allegedly, never received, which between 2012 and 2016 added up, across the two super funds, to more than $100 million in fees for NAB.
ASIC estimates that the full amount of ‘fees for no service’ rebated to customers by all the major institutions, including NAB, will eventually exceed $850 million.
Thursday’s case may prove to be the first of many major civil – and potentially criminal – cases to arise from evidence heard publicly at the royal commission.