CBA to pay $5m
The Commonwealth Bank of Australia (CBA) has been ordered by the Federal Court of Australia to pay a $5 million penalty due to breaches of the Australian Securities and Investment Commission (ASIC) Act and Corporations Act for failures in their AgriAdvantage Plus Package.
It was also ordered to publish a corrective notice in the form determined by the court.
From May 2005 to December 2015, CBA sold customers the package which entitled them to benefits such as the fee waivers, interest rate discounts and bonus interest on savings, in exchange for the payment of package fees on 22 CBA products.
ASIC alleged and CBA admitted that:
- Contrary to the terms of the package, CBA did not provide certain benefits to customers and, as a result, customers were overcharged fees and interest on loans and fees, and underpaid interest on savings. CBA also overcharged package fees to certain customers;
- The causes of CBA’s failures included the highly manual nature of CBA’s systems by which the package benefits were applied as well as CBA having no systems or processes in place to check whether customers were receiving benefits; and
- A total of 8,659 customers were impacted by CBA’s conduct on 131,542 occasions, in circumstances where CBA benefited from a total of $8,087,276.23 in incorrectly charged fees and interest on loans, and underpaid interest on savings.
- In his decision, Justice Beach had found:
- CBA had breached its obligation to do all things necessary to ensure financial services covered by its Australian Financial Services (AFS) licence were provided fairly, honestly and efficiently.
- The contraventions arose out of CBA’s failure to establish and maintain systems and processes to ensure that it could provide the benefits from the package in accordance with its terms and conditions.
- Although ASIC had sought only penalties and declarations as to CBA’s contraventions during the penalty period, the seriousness of those contraventions was to be viewed in the context of CBA’s failings for the broader period of over 10 years; and
- A pecuniary penalty of $5 million was appropriate having regard to the number of contraventions, the prejudice to customers, the duration of the contraventions and the inadequacy of CBA’s internal systems and processes.
Daniel Crennan, ASIC deputy chair, said ASIC considered CBA’s conduct in this matter, which was examined in detail during the Financial Services Royal Commission, was the result of inadequate systems and processes.
“Because of its conduct, CBA failed to deliver its AgriAdvantage package efficiently, honestly and fairly as it was obliged to do under s912A of the Corporations Act. As a result, over 8,000 customers were affected,” Crennan said.
ASIC commenced proceedings against CBA on 16 March, 2020.
AUTHOR
Chris Dastoor
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