Appearing before the Senate estimates committee on Thursday, ASIC chair Joseph Longo was questioned regarding fees for no service and whether these issues are still ongoing following the royal commission and the millions that banks have since had to pay in both fees and compensation.
According to the regulator’s data, six of Australia’s largest banking and financial services institutions have paid or offered a total of $4.7 billion in compensation to customers who suffered loss or detriment because of fees for no service misconduct or non-compliant advice.
“It’s a truism that systems and processes at the banks are always in need of improvement and enhancement so one can never be certain that those systems will be been fixed forever. But lots of progress has been made coming out of the royal commission,” said Mr Longo.
Also addressing the Senate estimates committee, ASIC deputy chair Sarah Court said that the presumption cannot be made that issues of fees for no service, and legacy systems in large financial institutions, have been “completely fixed”.
“There’s been progress made, there’s been billions of dollars of remediation, and there’s also been multimillion-dollar penalty applied by courts in relation to that conduct,” said Ms Court.
“But we do continue to have cases where fees for no service are being alleged, and we continue to investigate them and take court action where it is appropriate.”
Asked whether she believes the $4.7 billion paid or offered in compensation covers the revenue illegally obtained by financial institutions, Ms Court declined to comment.
“You would have to ask that question of those institutions,” she said.
“Certainly, the remediation figure is eye-watering.”
Moving on to the Australian Banking Association’s revised Banking Code of Practice, Malcolm Roberts, Senator for Queensland, asked the regulator whether certain changes could possibly unwind the work done on fees for no service over the past six years.
Namely, according to Mr Roberts, the new code proposes to remove a clause that requires a bank to make sure it has a customer’s agreement before charging a fee for a new service.
ASIC commissioner Kate O’Rourke responded with: “I am not aware of that deletion.
“The general answer is that there are provisions more widely in the code that would be relevant to whether fees for no service can be charged.”
ASIC is currently consulting on the proposed changes before potentially approving the new code, which contains a set of contractually enforceable standards that customers and small business can expect subscribing banks to uphold.
In September, a Federal Court judge who handed NAB the maximum $2.1 million penalty for continuing to charge its customers despite knowing the fees were wrong, said the punishment was not enough to deter the banking giant from engaging in similar conduct again.
NAB was found to have charged 2,888 personal banking customers and 513 business banking accounts periodical payment fees where it knew it had no contractual agreement to do so and failed to inform its customers about the wrongful charging on their accounts.
In announcing the judgment, Justice Roger Derrington said the $2.1 million fee was “regrettable” as only a substantial penalty could deter NAB from engaging in similar conduct again.
“The maximum penalty of $2.1 million is unlikely to have any real impact on the bank’s future conduct,” Justice Derrington said.
Maja Garaca Djurdjevic
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
