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A bad week for the big banks and AMP just got a whole lot worse, with confirmation ASIC is likely to pursue them through the courts over the fee-for-no-service scandal and demand they refund around $1 billion worth of fees already charged.
Key points:
- Banks and AMP to pay back $1b to customers in fees-for-no-service scandal and face criminal sanctions
- ASIC says Parliament needs to tighten laws banning conflicted commissions
- APRA concedes it has never taken civil action against superannuation trustees for failures
On the final day of a two-week block of hearings on the superannuation sector, the banks were put on notice they could facing criminal charges for the practice.
ASIC deputy chair Peter Kell told the commission that so far the big four banks and AMP had refunded $260 million to customers who were wrongly charged fees.
"It doesn't give me any pleasure to say this, but I would not at all be surprised if it ends up being in excess of $1 billion," he said.
Mr Kell said there had been no court action so far over the scandal, but said it was pending.
"So far we've had enforceable undertakings, bannings, and the licence condition," he said.
"There is a very high likelihood of proceedings commencing in the near future."
Mr Kell said over the last five years ASIC had considered criminal charges in relation to the fees-for-no-service scandal
ASIC has carried out 27 investigations and collected around 2.5 million documents as part of its investigations.
Mr Kell said the investigation into allegations the National Australia Bank had overcharged superannuation customers and financial advice clients was still going.
Earlier this week the commission released a scathing ASIC report into NAB which accused the bank of breaking both the Corporations Act and the ASIC Act.
Tougher laws on commissions
Mr Kell also told the hearing that grandfathered commissions were not in the best interests of consumers.
These are commissions charged on investments made before the practice was banned in 2014 due to the inherent conflicts of interest in sales-driven remuneration
Mr Kell said it was up to parliament to tighten the laws that still allowed the conflicted payments.
"Parliament has in effect put in place something that enables the continuing payment of commission that generate conflicts of interest and unnecessary cost widely across the financial system," he said.
"For the interests of consumers in the financial system as a while it would be highly desirable for it to be fixed at a policy level."
APRA under fire
The banking regulator has come under fire at the Financial Services Royal Commission for not doing enough to police the superannuation industry.
Australian Prudential Regulation Authority deputy chair Helen Rowell was grilled by senior counsel assisting the commission Michael Hodge QC.
The commission heard APRA did not take any legal action against the Commonwealth Bank-owned Colonial First State for missing a legal deadline to transfer superannuation members into low-cost, default superannuation funds known as My Super.
At least 15,000 people did not have their superannuation paid into a low-cost default fund by the deadline of January 1, 2014, and the commission heard the breaches continued until August 2016.
Ms Rowell was also taken to task over why APRA approved a call script and letter which was read by Colonial First State call centre staff to superannuation customers to dissuade them from moving into My Super products, a move which would mean that Colonial First State would lose commissions.
Unacceptable or not desirable?
Earlier in the week Colonial First State executive Linda Elkins admitted the behaviour had misled superannuation customers.
Mr Hodge read part of the call script to Ms Rowell.
Mr Hodge: "Do you think that on its face that is misleading?"
Ms Rowell: "I agree that is doesn't provide complete information to the member to enable them make their choice or decision."
Mr Hodge: "And is that an acceptable outcome from APRA's perspective?"
Ms Rowell: "It's not a desirable outcome"
Mr Hodge: "It's not desirable? Surely it's unacceptable from a regulator's perspective?"
Ms Rowell: "It would be preferable if there was complete disclosure to the members."
The APRA deputy chair also told the hearing AMP's policies and processes were regarded as adequate by the regulator.
That's despite revelations that AMP wrongly charged fees to superannuation customers and did not monitor the accounts of superannuation customers who chose to invest in cash.
Never taken action
Ms Rowell also told the commission that ARPA had never taken civil action against a superannuation trustee for breaches of the sole purpose test.
This could include the fees-for-no-services issue where some members had fees deducted from their accounts without ever receiving that service or advice.
The commission heard APRA has only applied once to court to have a superannuation director disqualified following changes to the law in 2008.
Ms Rowell said she disagreed with criticism of APRA by the Productivity Commission that the regulator's activities were conducted behind closed doors and that was not an effective way of deterring wrongdoing.
Topics: company-news, banking, superannuation, royal-commissions, australia
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