The regulator has announced four banks will pay millions of dollars in remediation for inappropriately charging fees to clients.
Hearing that, you’d be forgiven for feeling like you were stuck in a knock-off of Bill Murray’s 1993 hit film Groundhog Day.
But it was this week that ASIC announced ANZ, Bendigo and Adelaide Bank, CBA and Westpac will remediate customers $28 million for keeping at least two million Australians on low incomes in high-fee accounts.
Long-time members of the industry would’ve had their ears prick up: here’s another case of the banks overcharging customers.
The ASIC investigation found 150,000 customers on low incomes held high fee accounts, despite being eligible for low-fee accounts. Indigenous customers, particularly those who receive ABSTUDY (government financial assistance for indigenous students and apprentices under 24 years old), were among those affected.
The report noted low-fee accounts exist so that no one is “excluded from the financial system” with rules and guidance provided through the Banking Code in 2013.
Low-fee accounts have features such as free direct-debit cards, unlimited transactions within Australia, no account-keeping fees, and no overdraw fees.
The issue of low-income customers holding high-fee accounts was brought up in the financial services royal commission, with Commissioner Kenneth Hayne finding processes from banks at the time were so arduous they prevented customers from switching to lower-fee accounts.
The Hayne royal commission final report reached its fifth anniversary earlier this year, and half a decade later the financial advice sector still has an adversarial view of the banks that fostered a sales-based culture and became a blight on what many were seeking to create a profession from.
The banks will have to cover the cost of remediation, but for them it’s just the cost of doing business. ASIC Commissioner Alan Kirkland had spent much of his pre-regulatory career fighting against businesses in the interests of consumers, but the action ASIC has taken in light of its findings seems to force little accountability on the offenders for what is a complete lack of governance.
That’s not to suggest that hammering the banking sector with levies or other pre-emptive costs is the answer, but this seems to have been a good enough solution for the advice sector, so perhaps that does a workable precedent for the banking industry as well.
Professional Planner doesn’t want to perpetuate the idea that banks and super funds are completely avoiding the scrutiny of regulators, financial advice is an industry that has cleaned itself up and driven itself to become a profession, so there is understandably a high sense of injustice that a sector now dominated by professionalised, small businesses is left to cover the costs of enforcement of not only its own practitioners’ wrongdoing, but also the wrongdoing of any potential imposters providing unlicensed advice.
Cleaning up the advice industry has meant a reduction in the number of advisers to pay the ASIC levy. A loss of advisers from the ASIC Financial Adviser Register was an inevitability. It was pure bureaucratic incompetence that neither political party made plans for an alternative funding model that would mitigate the impact of the decline in adviser numbers to avoid overburdening those that remained committed to driving the profession forward.
Then, of course, there is the unfairness of advisers covering the cost of remediation for the advice failures of Dixon Advisory. The latest figures from the Australian Financial Complaints Authority shows there were 2773 registered complaints against Dixon as at the end of the financial year.
The Compensation Scheme of Last Resprt (CSLR) has the very real possibility of becoming a lose/lose scenario: industry participants are left on the hook to cover misconduct they had nothing to do with; while victims are left with a compensation cap of $150,000 that won’t cover losses above that threshold.
ASIC has been criticised for directing Dixon victims to claim under the scheme, which isn’t the problem; at least victims have some recourse. The problem was due to the regulator’s inability to actually regulate.
The institutions caught up in this latest banking scandal will cover part of the CSLR – $241 million is being contributed by the 10 biggest financial institutions, which covers some of the claims – but inaction from the regulator to either pursue company leadership or Dixon advisers only gives credence to Senator Andrew Bragg’s view that ASIC is an ineffectual regulator.
Worst of all, the Quality of Advice Review and Delivering Better Financial Outcomes reforms package has opened the door for banks to return to advice. While the expectation is they won’t return to advice in the same capacity as they did before the royal commission, Professional Planner wouldn’t blame the advice community for having a sense of anxiety about the banks returning in any capacity – and what they will be willing to contribute to any of these enforcement or compensation levies.
The work Minister for Financial Services Stephen Jones does in the financial advice sector – good or bad – largely flies under the radar outside the sector it directly affects. While the Quality of Advice Review process has had some mainstream coverage, ultimately what gets him on the ABC or Sunrise is talking about cracking down on scammers targeting financial institutions. That’s a noble cause, but cases like this show sometimes the scamming is coming from inside the building.
