Australia’s corporate watchdog has launched six civil penalty proceedings against Westpac (ASX: WBC) today, submitting to the court that combined penalties of $113 million are appropriate.
The bank has admitted the allegations in each of the proceedings and will remediate approximately $80 million to customers for conduct that includes charging more than $10 million in advice fees to 11,000 deceased customers.
The proceedings, each the result of an individual Australian Securities and Investment Commission (ASIC) investigation, allege compliance failures across multiple Westpac businesses over many years and affecting thousands of customers.
“ASIC is disappointed to have to yet again commence legal proceedings, on this occasion no fewer than six times, against a major bank,” ASIC deputy chair Sarah Court said.
“The conduct and breaches alleged in these proceedings caused widespread consumer harm and ranged across Westpac’s everyday banking, financial advice, superannuation and insurance businesses.
“A common aspect across these matters has been poor systems, poor processes and poor governance, which is suggestive of an overall poor compliance culture within Westpac at the relevant time. Customers are entitled to have trust and confidence in Westpac being able to deliver what it promises, without suffering financial harm. Westpac must urgently improve its systems and culture to ensure these systemic failures do not continue.”
The six matters filed against Westpac concern:
Fees for no service – deceased customers:
ASIC alleges that over a 10-year period, Westpac and related entities within the Westpac group, charged over $10 million in advice fees to over 11,000 deceased customers for financial advice services that were not provided due to their death.
ASIC alleges that Westpac distributed duplicate insurance policies to over 7,000 customers for the same property at the same time, causing customers to pay for two (or more) insurance policies where they had no need for the additional policies. ASIC also alleges that Westpac issued insurance policies to, and sought payment of premiums from, 329 customers who had not consented to entering into an insurance policy.
Insurance in super:
ASIC alleges that Westpac subsidiary BT Funds Management charged members insurance premiums that included commission payments, despite commissions having been banned under the Future of Financial Advice reforms.
BT Funds Management represented that the insurance fees had been properly deducted from members accounts when in fact the insurance fees that were deducted included commissions that were not permitted. Some members also paid commissions to financial advisers via their premiums even though they had elected to have the financial adviser component removed from their account. BT Funds is remediating over $12 million to over 8,000 affected members who were incorrectly charged.
The Australian Prudential Regulation Authority (APRA) has also been reviewing these matters and ASIC and APRA have taken a coordinated approach to their respective inquiries.
Inadequate fee disclosure:
ASIC alleges that Westpac licensees BT Financial Advice, Securitor and Magnitude (all no longer operating) charged ongoing contribution fees for financial advice to customers without proper disclosure.
Some fees were not disclosed to the customer at all, at other times the amount disclosed was less than the amount charged. It is estimated that at least 25,000 customers were charged over $7 million in fees that had not been disclosed, or adequately disclosed.
Deregistered company accounts:
ASIC alleges that Westpac did not have appropriate processes to manage accounts held in the names of deregistered companies. As a result, Westpac allowed approximately 21,000 deregistered company accounts to remain open.
Westpac continued to charge fees on those accounts and allowed funds to be withdrawn from these accounts that should have been remitted to ASIC or the Commonwealth.
ASIC alleges that Westpac sold consumer credit card and flexi-loan debt to debt purchasers with incorrect interest rates. These interest rates were higher than Westpac was contractually allowed to charge on at least part of the debts, resulting in more than 16,000 customers, who were likely to be in financial distress, being overcharged interest. Westpac and/or the debt purchasers have refunded over $17 million to affected customers.
“It is unprecedented for ASIC to file multiple proceedings against the same respondent at the same time,” Court said.
“However, these were exceptional circumstances. ASIC had numerous Westpac-related matters under investigation through the course of 2021, and we decided to expedite those matters for consideration by the Court at the earliest opportunity.”
WBC announced it has reached an agreement with ASIC to resolve the six separate matters through civil penalty proceedings.
“As flagged, we have been working to resolve a number of outstanding regulatory matters before the Bank. We have cooperated with ASIC through the investigations and the process to get to this resolution today,” Westpac CEO Peter King said.
“This outcome is an important step forward for us as we continue to fix issues and build stronger risk foundations.
“In each of these matters, Westpac has fallen short of our standards and the standards our customers expect of us. The issues raised in these matters should not have occurred, and our processes, systems and monitoring should have been better. We are putting things right and unreservedly apologise to our customers.”
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