The Commonwealth Bank (CBA) has launched a refund program after releasing details of systemic regulatory ‘issues’ costing customers and staff millions of dollars.
The list of issues include selling lines of insurance that wouldn’t have been paid out, over insurance for home loan customers, the underpayment of superannuation to employees and failing to cancel insurance on numerous deceased estates.
The revelations of poor regulatory practices came after the CBA board announced that Chief Executive Ian Narev would retire from his position at the end of the 2018 financial year.
The bank conceded the statement of reviews and remediation processes it detailed was “not an exhaustive list of all regulatory matters” it faced, but gave a brief rundown on where several stood.
- A review of superannuation payable to all employees dating back eight years. The review is ongoing and covers 36,000 current and former workers. The total refunds are yet to be determined, but the first $16.7 million tranche of repayments is expected to be made shortly. An average of about $463 plus interest will be paid per employee.
- Refunds to Credit Card Plus insurance customers who “may not have met the employment criteria, meaning they may not, if the need arose, have been able to receive certain benefits under the policy.” In a deal struck with the Australian Securities and Investments Commission (ASIC) the bank will soon start refunding about $10 million, including interest, to 65,000 customers.
- Refunds to Home Loan Protection insurance customers charged an incorrect premium amount or who had incurred premium charges before the home loan was drawn down. So far, 9600 customers have been identified and $586,000 has been repaid.
- Charges on disputed card transactions. The bank noted when refunding disputed transactions on customers’ cards certain charges were not always correctly adjusted. After reviewing 4.5 million transactions dating back to 2009, refunds totalling $5 million will be made to around 355,000 customers.
- Deceased estates. “ASIC was notified about an issue affecting some insurance products, where for a number of accounts, a confirmation of the cancellation of an existing insurance policy may not have been sent to the deceased estate,” CBA said in a statement. “We are currently undertaking a detailed investigation back to the year 2000 to confirm the number of affected customers and will contact their estates and remediate if appropriate.”
ASIC Deputy Chair Peter Kell said it was unacceptable that customers were sold insurance that did not meet their needs.
“One of ASIC’s priorities is addressing poor consumer outcomes associated with add-on insurance, including CCI (consumer credit insurance),” Mr Kell said.
“Consumers should not be sold products that provide little or no benefit, and banks should have processes in place that ensure this.”
CBA CEO Mr Narev and other senior executives had their bonuses blocked last week in response to alleged breaches of the anti-money laundering and terrorism financing laws by the bank.
When news first broke that Mr Narev was resigning, it seemed as though the weight of the accumulated scandals had finally forced the board to take action.
Then the details became apparent and we discovered that he would remain for the better part of a year and that he continued to enjoy the full support of the board.
This begs the question: what exactly constitutes a sacking offence at the bank?
The CBA is Australia’s largest money lender and thanks to a succession of scandals, its brand has been dragged through the mud.
The only time the board saw fit to take any action at all over the scandals, was after the alleged breaches surfaced. Mr Narev’s pay packet was subsequently slashed by more than 50 per cent after losing his bonuses for the financial year.
That still left the bank boss with a total pay packet of $5.5 million last financial year, and one expects the bonuses will be back on the table next year, as well as a hefty golden handshake.
“Nothing has changed — we have full confidence in Ian as CEO,” CBA chair Catherine Livingstone told reporters during a briefing to announce Mr Narev’s resignation.
Where is the accountability?
The failure to act sooner over serious regulatory breaches that have stolen millions from customers and staff only heightens the need for a royal commission into the financial services industry, because banks seem incapable of holding their own to account.
What do you think? Should Mr Narev have been sacked for the litany of failures on his watch? Should all the CBA executives lose their jobs? Would you like to see a banking royal commission?