Justice Beach handed down his decision on Friday in the last of six separate civil penalty proceedings filed by ASIC against Westpac in November 2021, penalising Westpac $40 million for charging fees totalling over $10.9 million to more than 11,800 deceased customers.
ASIC Deputy Chair Sarah Court said that over the course of 13 years, more than 70,000 customers have been affected by the bank’s failures, either by being incorrectly charged or given the wrong information.
“The breaches found by the court in these six cases demonstrate a profound failure by Westpac over many years and across many areas of its business to implement appropriate systems and processes to ensure its customers were treated fairly,” said Ms Court.
“Westpac, like all licensees, has an obligation to be honest and fair in its provision of financial services. Despite this, Westpac failed to prioritise and fund the systems upgrades necessary to help fulfil this obligation.”
“The sheer scale of this impact suggests that, at the time, Westpac had a culture that did not prioritise compliance,” Ms Court continued.
Across all six matters, Justice Beach noted that systems and compliance failures were a common feature and the misconduct by Westpac was considered serious. Regarding the charging of deceased customers, Justice Beach commented that Westpac and the related entities ‘utterly failed to address the issues systematically’.
The six matters against Westpac concern:
Fees for no service – deceased customers
Over a 10-year period, Westpac and related entities within the Westpac group, charged over $10.9 million in advice fees to over 11,800 deceased customers for financial advice services that were not provided due to their death.
Penalty handed down by the Court: $40 million
General insurance
Westpac distributed duplicate insurance policies to over 7,000 customers for the same property at the same time, including 3,899 customers since 30 November 2015, causing customers to pay for two (or more) insurance policies where they had no need for the additional policies. Westpac also issued insurance policies to 329 customers who had not consented to entering into an insurance policy.
Penalty handed down by the Court: $15 million
Inadequate fee disclosure
Westpac, Securitor and Magnitude (advice businesses) charged ongoing contribution fees for financial advice to retail customers without disclosing, or properly disclosing those fees. It is estimated that in over eight years, not less than 25,000 customer accounts were charged at least $10.6 million in fees that were not disclosed, or properly disclosed.
Penalty handed down by the Court: $6 million
Deregistered company accounts
Westpac allowed approximately 21,000 deregistered company accounts, holding approximately $120 million in funds, to remain open and continued to charge fees on those accounts. Westpac allowed funds to be withdrawn from these accounts that should have been remitted to ASIC or the Commonwealth. Justice Beach found that Westpac knew its systems were inadequate, did not fix those systems in a timely fashion and benefitted from its own conduct.
Penalty handed down by the Court: $20 million
Debt onsale
Westpac sold consumer credit card and flexi-loan debt to debt purchasers with incorrect interest rates. These interest rates were higher than Westpac was contractually allowed to charge on at least part of the debts, resulting in more than 16,000 customers, who were likely to be in financial distress, being overcharged interest.
Penalty handed down by the Court: $12 million
Insurance in super
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.
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. Over 9,900 BT Funds members were affected.
Penalty handed down by the Court: $20 million
Customers to receive $80 million
Westpac admitted to the allegations in each of the proceedings and will remediate more than $80 million to customers.
More to come.
Securitor and Magnitude are self-employed channels are they not? Or are they excluded from any bad practices outlined?
Self employed yes, but not self licensed. They are like contractors on a building site. Just a small part of someone else’s broader plan.
Let me guess, not one of the executives were accountable for any of this. ASCI have not found any of them to be “not fit and proper’ to work in the financial services sector.
So again, one rule for Advisers and another entirely for the banks?
An adviser can receive a lifetime sentence for sending statements that a client doesn’t want late; while a bank rips off dead folk for $10m, fraudulently receives insurance commissions from superannuation insurances after commissions were banned; paid commissions to advisers even though the clients opted out; and didn’t even disclose fees to 25,000 clients (!!!) and are allowed to pay their way out of any real penalties. Especially when you compare the $66m in fines related to those fraudulent financial services issues to the bank’s billions in annual revenue last year would be similar to an adviser slipping ASIC a $50 and walking back to their desk to recommence working as an Adviser again.
Then there’s Westpac’s track record with money laundering, credit code breaches and more showing that they’re clearly not adequately trained, experienced nor qualified (using terms ASIC use against Adviser for even the smallest administrative breaches).
This is absolutely [b]outrageous [/b] and shows just how corrupt the system of regulation has become.
All just part of the cost of doing business for them. It amounts to 2% of their net profit for the 2021 financial year!
Advisers lose their livelihoods (and often freedom) for much much less. Banks pay a fine and all the managers responsible for the serious misconduct keep their jobs, seven figure salaries and bonuses. Seems like a fair outcome.
If a person stole $80M from the masses they would do jail time, but as usual financial services executives get away with it.
All fixed now – well done ASIC…no one banned and all Executives get to keep their jobs and bloated salary. Nothing to see here obviously!!
Get the boots out for the next Adviser that doesn’t get a compliance doc signed within the prescribed time-frame!!
Just another tax, and increases the cost of advice. Westpac are out of advice , and one wonders why?