You are here
Australia's NAB faces 'fees for no service' lawsuit
AUSTRALIA'S securities regulator on Tuesday filed a lawsuit against National Australia Bank (NAB) accusing it of charging financial advice customers "fees for no service", even as a government-ordered inquiry lambasted the industry for the practice.
The misconduct allegations are the latest to hit Australia's financial sector after Westpac Banking Corp was sued for breaches of anti-money laundering laws, including facilitating payments to child exploiters.
The accusations against NAB, Australia's third-largest lender by market capitalisation, are likely to raise heated questions from investors at the bank's annual general meeting in Sydney on Wednesday.
In a statement on Tuesday, the Australian Securities and Investments Commission (ASIC) said NAB had engaged in "fees for no service" for its financial planning customers from 2013 to 2019.
The regulator said the fees were even charged to customers during the 2018 Royal Commission hearings, at which the bank's executives defended the practice. That inquiry ultimately claimed the careers of former chairman Ken Henry and chief executive Andrew Thorburn.
ASIC also claimed NAB failed to issue, or issued defective, fee disclosure statements (FDS).
"It is also ASIC's case that NAB engaged in unconscionable conduct from at least May 2018 by continuing to charge ongoing service fees to certain customers when it knew that it had not delivered the services and had issued defective FDSs or at least knew that there was a real risk that it had engaged in this conduct," the regulator said in a statement.
ASIC added that NAB did not stop charging fees to its customers until Feb 4, the same day the final Royal Commission report from retired judge Kenneth Hayne was published.
Fees-for-no-service offences could invite a maximum penalty of A$250,000 (S$232,000) per breach, while unconscionable conduct and misrepresentation, A$1.7 million to A$2.1 million a breach, ASIC said.
The regulator accused NAB of 8,927 cases of fees for no service and 3,420 instances of unconscionable conduct.
It did not say how much it planned to fine the bank but the penalties could total up to A$9.75 billion, according to figures it provided.
In a statement to the Australian Securities Exchange, NAB said it started to repay financial planning clients last year and the process would run at least until the middle of next year. The bank said it had so far repaid A$37.8 million.
"We take this action very seriously and will now carefully assess the allegations," NAB chief legal counsel Sharon Cook said.
NAB and its big banking peers have had to dole out billions of dollars to compensate aggrieved customers, with NAB alone setting aside a A$2.09 billion pot. REUTERS