Refunds and remediation paid by Australia’s major financial institutions over fee-for-no-service breaches could top $850 million, regulator ASIC said on Tuesday.
ASIC said remediations made by financial insitutions to date could almost quadruple when its investigations are completed. To date ANZ, CBA, Westpac, AMP and NAB have paid or offered customers $222.3 million.
The regulator said it has Bendigo Financial Planning Ltd, Police Financial Services Ltd, State Super Financial Services Australia Ltd (trading as StatePlus), and Yellow Brick Road in its sights. It also knows another five institutions have made provisions to remediate fee-for-no-service breaches.
“If all of these provisions are paid in full, FFNS remediation may exceed $850 million,” ASIC said in a statement.
The news came as former NAB super trustee chair Nicole Smith was grilled at the banking royal commission over further examples of the bank’s charging of fees for no service to superannuation customers. All up, to date NAB and subsidiary Nulis have paid or agreed to pay a total of $108 million to remediate fee-for-no-service breaches.
Ms Smith told the commission she did not believe fees charged on NAB employer super accounts without advisers attached should be refunded because customers were not able to ask for them to be turned off, as was the case with personal accounts.
Instead they had to ask through their employer and this situation was not covered in a product disclosure statement that was deemed misleading in the case of personal accounts.
At one stage Michael Hodge QC put to Ms Smith: “As the trustee, you have deducted money from members accounts in order to pay for a service that has not been provided to the members and now this related wealth entity is trying to find a reason to keep the money.”
Mr Hodge also called into question NAB’s ability to charge its so-called adviser contribution fee. He observed the fee was similar to the plan service fee that had been disallowed and refunded when it was found there was no service provided by the bank to customers.
While investigating NAB’s approach to dealing with the fee-for-no-service issues, Mr Hodge observed that the bank appeared to be asking the wrong question – whether it had adequately communicated the situation to its super fund members, rather than whether it should have been charging the fees at all.
NAB’s counsel Neil Young QC at one point tried to prevent the commission from making public a document that revealed how NAB had negotiated with ASIC over dealing with its breaches. After consideration, Commissioner Kenneth Hayne decided the document could be made public.
ASIC’s claims that refunds and remediation for misconduct by financial institutions could total as much as $850 million follows news the regulator will get $8 million in new funding from the federal government to embed staff inside major financial groups to help enforce the law.
The move was prompted by a lengthy review by newly-appointed ASIC chairman James Shipton. The embedding funding is part of a $70 million boost in the regulator’s resources amid the public and political focus on the royal commission.
“These new resources will ensure that ASIC is the tough cop on the beat — the tough cop that all Australians need, and expect, ASIC to be,” said Revenue and Financial Services Minister Kelly O’Dwyer.