The Australian Securities and Investments Commission (ASIC) has commenced civil penalty proceedings against National Australia Bank (NAB) citing several thousand contraventions of the ASIC Act and the Corporations Act over fee-for-no-service and fee disclosure statements.
The regulator said that it would be alleging 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). ASIC alleges that the defective FDSs contained false or misleading representations in that they did not accurately describe the fees the customer paid and/or the services the customer actually received. The provision of the defective or out-of-time FDSs terminated the ongoing fee arrangements between NAB and its customers and it is ASIC’s case that consequently NAB was not lawfully entitled to continue to charge the fees;
- 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 said that it would also be alleged that NAB engaged in unconscionable conduct from at least May 2018 by continuing to charge ongoing service fees to certain customers when it new that it had not delivered the services and had issued defective Fee Disclosure Statements or at least knew that there was a real risk that it had engaged in this conduct.
However, it said NAB did not stop charging fees to its customers until 4 February, this year.
ASIC said it was seeking declarations, pecuniary penalties and compliance orders from the Federal Court to prevent similar contraventions occurring in the future.
"Fees-for-no-service misconduct has been widespread and is subject to ongoing ASIC regulatory responses including investigations and enforcement actions. This widespread misconduct was examined in some detail by the Financial Services Royal Commission. ASIC views these instances of misconduct as systematic failures, unfair to customers including those that are more vulnerable," ASIC said.
"When the fees-for-no-service misconduct is coupled with Fees Disclosure Statements inadequacies or failings, customers are potentially placed in a more disadvantageous position. The customer may not therefore have been provided with the opportunity to know whether they have received the services for which they have paid or the amount of fees charged to them’,” ASIC deputy chair, Daniel Crennan QC said.