NAB held back the full extent of its fees-for-no-service in superannuation from regulator ASIC until it heard details of other banks’ liabilities, the financial services royal commission has heard.

NAB subsidiary MLC knew it had been charging fees for no service to about 220,000 super fund members who had no advisers attached to their accounts by mid 2016. It had started examining how it would compensate them.

Internal documents released to the commission showed there was discussion among executives about whether they could characterise the fees received as payment for service. That was because those paying the fees could also receive online and phone servicing from the bank if required.

On Tuesday, the commission heard bank documents suggested “it was still possible to say that other streams of value were provided by MLC to clients without a linked adviser and therefore it was possible to retain the PSF [plan service fee]”.

Some bank executives “pushed back” against that view, the commission heard.

Paul Carter, giving evidence for NAB, told the commission he did not personally support that view.

“We were, rather, trying to understand the nature of the issue … so we could come to a more considered conclusion,” he said.

At the same time, in mid-2016, the bank considered using an ‘opt-in’ model to recompense customers who had been charged fees for no service. That would have involved NAB writing to those customers and asking if they wanted to receive compensation.

The bank estimated that plan was likely to cost it $23 million, well below what was finally paid.

NAB ‘not trying to avoid compensation’

Mr Carter spent considerable time arguing that NAB was not trying to find ways to avoid full compensation but was simply exploring options to deal with the issue. At one point that triggered an intervention from Commissioner Kenneth Hayne.

“Do you accept that NAB charged fees for no service?” he said.

Mr Carter: “In this particular instance … the view was that services were being delivered, but notwithstanding that the PSF should be refunded.”

Nonetheless, by October 2016 NAB had agreed with ASIC that it had liabilities in the fee-for-no-service issue. The regulator took the view that it owed $16.2 million to 120,000 customers.

Just days later, on October 21, 2016, an internal NAB document showed the bank knew it had total liabilities of $34 million to 220,000 customers.

After a few more days, ASIC released further details. They showed that overall liabilities from the banks on the issue – which had been $86 million – had jumped considerably, and CBA alone actually had a liability of $105 million. NAB then detailed that it knew its overall liability was, in fact, $34 million.

Counsel assisting the commission Michael Hodge QC asked Mr Carter about the time NAB took to concede to its total liabilities.

“When did you come to the conclusion it was not possible to retain the money [for fee-for-no-service]?” Mr Hodge asked.

Mr Carter replied that was when management had made a recommendation to trustees of the super fund concerned later in 2016.

“I wish we had moved more quickly … but we landed on the right spot. Full remediation was the right thing to do,” he said.

However, a further $67 million in unearned fees relating to employer superannuation was not agreed for remediation until last month, after NAB had conceded it was necessary.

“I’m not sure why it took two years to come to that view,” Mr Carter said.