After a Royal Commission littered with evidence of charging deceased clients fees, the Australian Banking Association (ABA) has announced that the Banking Code of Practice will be changed to improve the ways banks managed deceased estates.
The reforms would mean that once notified of a customer’s death, banks would proactively identify fees that are for products and services that could no longer be provided in the circumstances, stop charging those fees, and refund any paid.
The Association also flagged Code changes that it ambitiously said would end fees for no service, intending to make banks proactively contact customers to confirm what advice is required and only charge for what is then provided.
ABA chief executive, Anna Bligh, said that these two reforms addressed two of the biggest concerns raising by Commissioner Kenneth Kayne in his interim report on the Royal Commission.
“It has always been unacceptable for any organisations to charge fees without providing a service,” Bligh said. “This announcement will put beyond the shadow of a doubt that this practice has no place in Australia’s banking industry.”
“When someone loses a loved one, they need support and compassion as they finalise their loved one’s financial affairs. Charging ongoing advice fees to dead people is clearly unacceptable,” she continued.
The ABA also announced that it would seek legislative changes to the Future of Financial Advice reforms to remove all legislative provisions allowing grandfathering and trail commissions, effectively banning the fee structure that caused much controversy throughout the Commission.
Many large banks and financial advice firms had already signalled that they were ending grandfathering, with the Commonwealth Bank announcing earlier this week that it would refund any fees paid under the provision.