Westpac is in serious trouble with the Australian financial regulator after admitting it broke the law and treated customers poorly, including charging fees to at least 11,000 dead clients.
The Australian Securities and Investments Commission (ASIC) took the unprecedented step of launching six legal actions at once against Westpac overs its shoddy behaviour.
Westpac admitted fault relating to all six charges and agreed to pay $113 million in penalties for the alleged conduct while also making remediation payments of approximately $80 million to customers.
The allegations were made against Westpac’s banking, superannuation and wealth management brands as well as Westpac’s former general insurance business, explained ASIC deputy chair Sarah Court.
“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,” Ms Court said.
“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.
“It is unprecedented for ASIC to file multiple proceedings against the same respondent at the same time,” Ms 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.”
Charging deceased customers
ASIC alleges that over a 10-year period, Westpac and related entities within the group charged over $10 million in advice fees to more than11,000 deceased customers for financial advice services that were not provided because they had died.
ASIC alleges that Westpac distributed duplicate insurance policies to more than 7000 customers for the same property at the same time, causing customers to pay for two (or more) insurance policies where they were not needed.
ASIC also alleges that Westpac issued insurance policies to, and sought payments of premiums from, 329 customers who had not consented to entering into an insurance policy.
Insurance in superannuation
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 more than 8000 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.
The other charges relate to on-selling debt on consumer credit cards with incorrect interest rates and not closing accounts for deregistered company accounts.
Westpac chief executive Peter King said that the majority of affected customers had already been compensated and that any remaining payments would be made as quickly as possible.
“In each of these matters, Westpac has fallen short of our standards and the standards our customers expect of us,” Mr King said.
“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.”
What do you think of the penalties handed to Westpac for its terrible treatment of customers? Do you think the penalties go far enough? Why not share your thoughts in the comments section below?
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