ASIC launches six legal actions against Westpac
In an unprecedented move, the corporate regulator has launched six civil penalty proceedings against Westpac in the Federal Court that all allege widespread compliance failures across its banking, superannuation, wealth management, and its former general insurance business.
The Australian Securities and Investments Commission (ASIC) said in an announcement the alleged conduct occurred over many years and affected thousands of consumers.
ASIC deputy chair, Sarah Court, said: “It is unprecedented for ASIC to file multiple proceedings against the same respondent at the same time.
“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.”
Court said a common aspect across the matters had been poor systems, processes, and governance which was suggestive of an overall poor compliance culture with Westpac.
Westpac admitted the allegations in each of the proceedings and would remediate approximately $80 million to customers.
ASIC and Westpac would submit to the court that combined penalties of more than $100 million was appropriate.
Each matter would now be separately considered and determined by the court.
In response to the matters filed, Westpac said the majority of affected customers had been compensated and any remaining payments would be completed as quickly as possible.
Westpac chief executive, 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.”
The six matters were:
- Fee-for-no-service for deceased customers – Over a 10-year period, ASIC alleged Westpac and related entities charged over $10 million in advice fees to over 11,000 deceased customers;
- Insurance in super – ASIC alleged subsidiary BT Funds Management charged members insurance premiums that included commission payments, despite commissions having been banned under the Future of Financial Advice (FOFA) reforms;
- Inadequate fee disclosure – ASIC alleged 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. It is estimated that at least 25,000 customers were charged over $7 million in fees that had not been disclosed, or adequately disclosed;
- General insurance – ASIC alleged 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;
- Deregistered company accounts – ASIC alleged 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 and continued to charge fees on those accounts; and
- Debt onsale – 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.
The full list of Westpac businesses against which the allegations are made were:
- Westpac Banking Corporation;
- Advance Asset Management Limited;
- Asgard Capital Management Limited;
- BT Funds Management Limited;
- BT Funds Management No. 2 Limited;
- BT Portfolio Services Limited;
- Securitor Financial Group Pty Limited; and
- Magnitude Group Pty Ltd
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