NAB insists fees for no service a “process issue”

The National Australia Bank (NAB) chief executive, Andrew Thorburn, has defended some fees for no service charged by the bank as a “process issue” rather than dishonesty, as he came under fire from Counsel assisting the Commission, Michael Hodge SC, at the Royal Commission today.

“Dishonesty goes to intent and I don’t think I’ve seen this case and others where there was an intention to not do the right thing … I think it was wrong that we didn’t pick it up, and I think that we got onto it reasonably quickly,” Thorburn said, when drilled by Hodge on the bank’s former practice of retaining fees when clients were transferred to MLC.

He admitted that NAB did not have the right checks and balances in place, but said that the bulk transfers that occurred were “quite manual” and done without that intent.

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“It wasn’t 'let’s do it and see if we can get away with it' … it wasn’t that at all, it was a process issue,” he said, adding that when a complaint was made they acted “reasonable quickly” on it.

Thorburn also faced questioning on the commissions paid by the bank, with Hodge suggesting that commissions made to advisers sending clients to the bank for loans or other services were paid first and foremost in the clients’ interests.

“It seems like the main benefit to you rather than the customer, that is what you obtain is having one of these professionals effectively offer either explicitly or implicitly their endorsement to the customer of going to NAB,” the senior counsel said.

Thorburn disagreed: “It’s really just an opening of a door … it’s like anybody, one person recommending something to someone else. So I really do believe it’s a benefit for the customer, for convenience and speed and confidence, in seeing somebody who is endorsed by somebody who they respect.”

When asked why NAB would need to pay advisers if the recommendation was done in line with their professional duties, Thorburn said that while they often were not paid, he believed that in some cases it was justified.

“When you have a business where the nature of what they do is financial matters, and we have said that it’s important that that’s incidental or supplementary to their business, we still think it’s a legitimate commercial transaction to pay the referrer,” he said.

“Now, you’re pushing into some risk in this and I agree … but I think we’ve really constrained it for the moment and we’ve got some better controls happening.”

Hodge also asked the CEO whether NAB’s announcement that it would let 6,000 employees go last year would come at a cost to compliance and remediation, to which Thorburn insisted it should now as compliance was already getting more investment than it had before.

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