ASIC commences civil penalty proceedings against NAB over fees for no service conduct
The regulator alleges that, from December 2013 to February 2019, NAB failed to provide financial planning services to many customers but it charged fees to those customers.
The Australian Securities & Investments Commission (ASIC) today announces the launch of civil penalty proceedings in the Federal Court against National Australia Bank Limited (NAB) over Fees for No Service Conduct.
The regulator alleges that from December 2013 to February 2019, NAB:
- engaged in Fees for No Service Conduct by failing to provide ongoing financial planning services to a large number of customers while charging fees to those customers;
- failed to issue, or issued defective, fee disclosure statements (FDSs);
- failed to establish and maintain compliance systems and processes to detect and prevent these failures; and
- contravened its overarching obligations as an Australian Financial Services licence holder to act efficiently, honestly and fairly.
ASIC also alleges 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. However, NAB did not stop charging fees to its customers until February 4, 2019.
ASIC is seeking declarations, pecuniary penalties and compliance orders from the Federal Court to prevent similar contraventions occurring in the future.
The maximum civil penalty for contraventions alleged against NAB are:
- $250,000 per contravention for breaches of s962P (charging ongoing fees after the termination of an ongoing fee arrangement) and s962S (failing to provide a timely FDS);
- $1.7 to $2.1 million maximum penalty (depending on the time period) per contravention for breaches of s12CB (unconscionable conduct) and s12DB (false or misleading representations).
The Australian regulator estimates that NAB received over $650 million in ongoing service fees from 2009 to 2018. NAB has stated that it has provisioned more than $2 billion for Fee for No Service remediation across all of its advice licensees.
Fees for No Service conduct and remediation of that conduct by NAB and other licensees was examined as part of the Financial Services Royal Commission. ASIC has been monitoring NAB’s (and other licensees’) remediation of its fees for no service failures with the last update on its progress provided on March 11, 2019.
ASIC warned back then that most of the major banks are yet to complete reviews to identify systemic FFNS failures beyond those already identified and reported to ASIC since 2013. The reports are delayed and incomplete, the regulator said.
