Bad banking behaviour is back in the spotlight again this week, with the National Australia Bank (NAB) the latest financial institution to cop a whack for causing harm to its customers.
The Federal Court on Thursday ordered NAB to pay an $18.5 million penalty for failures relating to misleading fee disclosure statements.
The court explained that NAB had contravened its obligations to act efficiently, honestly and fairly by failing to have procedures and systems in place to provide timely and effective fee disclosure statements.
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Deputy chair of the Australian Securities and Investments Commission (ASIC) Sarah Court said the penalty was a timely reminder to banks to meet their obligations to their clients.
“NAB’s system failures resulted in significant fee disclosure failures over an extended period,” Ms Court said.
“This caused harm to customers as the inaccurate information meant they couldn’t make informed decisions about the financial services they were paying for.”
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The Federal Court found that NAB breached the law on numerous occasions when it charged fees for personal advice without giving customers compliant fee disclosure statements and when it failed to provide fee disclosure statements to clients within the time required.
It also breached the law when it made false or misleading representations to clients in fee disclosure statements about the amount clients had paid for services and the services which the clients had received.
The Federal Court also found that NAB had not established or maintained systems and procedures to identify whether:
- services were provided in accordance with client service agreements
- its fee disclosure statements were compliant
- it was prohibited from charging service fees.
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“Customers need to have confidence in their financial services providers that they will be charged correctly for the services they receive and given accurate and timely information,” Ms Court said.
In her decision, Justice Jennifer Davies observed that fee disclosure statement obligations “are specific consumer protection measures enacted for the safeguard of the interests of clients subject to ongoing fee arrangements and they are strict obligations, underscoring the seriousness of the contravening conduct”.
The Federal Court acknowledged NAB’s efforts to make early admissions of liability and took this into account in determining the penalty.
NAB responded to the penalty with the company’s legal spokesperson, Sharon Cook, apologising to affected customers.
“To address this issue, NAB stopped charging ongoing service fees to customers of its former NAB Financial Planning business in 2019,” Ms Cook explained.
“In 2020, we established a remediation program which has to date paid approximately $31 million to more than 15,000 customers in order to make things right.”
The news of the NAB fine follows a submission to the Australian Banking Association from 15 consumer groups, calling for more than 100 changes to the banking code to ensure better behaviour from banks and financial institutions.
Have you received a remediation payment from NAB for issues with its fee disclosures for financial advice? Were you satisfied with the resolution? Why not share your thoughts in the comments section below?
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