Big Bad Six remediation bill tops $3.6 billion
ASIC has reported that six of Australia’s largest banking and financial services institutions - AMP, Macquarie, and the big four banks - have paid or offered a total $3.6 billion to compensate nearly 1.3 million customers in relation to fees for no service or non-compliant advice as at 30 June 2022.
This includes a total of $438 million which was paid or offered by the institutions between 1 January and 30 June 2022.
The compensation is the result of remediation programs undertaken by the institutions following two major reviews undertaken by ASIC in 2016 and 2017, and the Banking and Financial Services Royal Commission (Hayne Royal Commission).
Charging fees for no service
The Fees for No Service issue involved systemic failures in the advice divisions where the financial institutions were charging fees from its clients despite not having delivered any services to them. These failures included customers charged for ongoing advice despite having no ongoing adviser allocated to them, as well as delivery failures by advisers and subsequent absence of licensee oversight. ASIC’s review identified a culture of reliance on automated processes alongside the prioritisation of fee generation for services over and above the delivery of those services. The report was also critical of sharp legal practice that conflicted with the interests of the customer.
Non-compliant advice
In March 2017 ASIC provided its review on the effectiveness of Australia financial services institutions to oversee its advisers. The report identified a number of areas of concern including failure to notify ASIC of instances of serious non-compliance concerns regarding adviser conduct, as well as significant reporting delays, and inadequate background checks and audit processes to asses whether advice complied with ‘best interest’ duties.
Remediation
AMP, ANZ, CBA, Macquarie, NAB and Westpac undertook review and remediation programs to compensate affected customers. ASIC has said that it is continuing to monitor the implementation of these programs.
The Hayne Royal Commission 2019 report was scathing in its response to this conduct - “there is no doubt that money was taken from clients. Nor is there any basis for doubting that, when taken, the taker did not intend to return it to the client”. Commissioner Hayne charged parliament and regulators to seek out those responsible within the financial services industry, identifying boards and senior management as those carrying primary responsibility.
The fact that affected customers are still being paid 5-6 years after ASIC’s reviews, and that yet more customers are still being identified and remediated, demonstrates the scale of this issue and its impact. The institutions currently expect that the completion date of the remediation range from September 2022 to February 2023.
Mackay Chapman
The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such. It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only. You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.
