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CBA to cough up $5 million for customer failings
The Commonwealth Bank of Australia has admitted that it failed more than 8,ooo customers using the AgriAdvantage Plus Package on more than 130,000 occasions in a new court judgement.
CBA to cough up $5 million for customer failings
The Commonwealth Bank of Australia has admitted that it failed more than 8,ooo customers using the AgriAdvantage Plus Package on more than 130,000 occasions in a new court judgement.
nestegg first highlighted the legal challenge against the bank as being brought by the Australian Investments and Securities Commission (ASIC) back in March.
Between May 2005 and December 2015, the Commonwealth Bank sold customers the AgriAdvantage Package, which reportedly entitled them to benefits in the form of fee waivers, interest rate discounts and bonus interest on savings, in exchange for the payment of package fees on 22 CBA products.
ASIC had alleged, and CBA consequently admitted, that contrary to the terms of the AA+ 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 AA+ Package fees to certain customers.
An ASIC statement revealed that the causes of CBA’s failures included the highly manual nature of CBA’s systems by which the AA+ Package benefits were applied as well as CBA having no systems or processes in place to check whether customers were receiving benefits, which was also noted in the Federal Court of Australia decision from Justice Beach.
According to the corporate regulator, 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.
Justice Beach considered that “CBA breached its obligation to do all things necessary to ensure that the financial services covered by its AFSL were provided efficiently, honestly and fairly”, and said a pecuniary penalty of $5 million was appropriate.
The judge had taken into consideration the number of contraventions over an extended period, the prejudice to customers, and the inadequacy of the bank’s internal systems and processes.
According to Justice Beach, “the penalty imposed recognises the gravity of the contraventions that occurred whilst taking into account the ‘very substantial mitigating circumstances’, including that the contravening conduct was not deliberate and that there has since been ‘complete rectification and remediation’.”
Weighing in on the court’s findings and decision to impose a $5 million penalty, ASIC deputy chair Daniel Crennan QC said that “as recognised by Justice Beach in his judgement, CBA took steps to address the harm that the conduct caused and, importantly, made admissions as to its contraventions of the law at the first possible opportunity in the litigation”.
He said ASIC expects all entities it regulates to “make admissions and engage in the penalties process at the earliest possible opportunity” when ASIC issues proceedings against them.
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