In an unprecedented move the Australian Securities and Investments Commission (ASIC) is launching six cases against Westpac Banking Corporation in the Australian Federal Court at the same time.
ASIC says the civil penalty proceedings are each the result of an individual ASIC investigation, alleging widespread compliance failures across multiple Westpac businesses. The alleged conduct occurred over many years and affected many thousands of consumers.
The Westpac businesses targeted by ASIC include its banking, superannuation and wealth management brands as well as Westpac’s former general insurance business. Westpac New Zealand is not mentioned in ASIC's statement.
The cases include Westpac charging deceased customers fees, distributing duplicate insurance policies to customers for the same property at the same time, subsidiary BT Funds Management charging members insurance premiums that included commission payments, and selling consumer credit card and flexi-loan debt to customers with incorrect interest rates.
ASIC Deputy Chairperson Sarah Court says it's unprecedented for ASIC to file multiple proceedings against the same respondent at the same time.
"ASIC is disappointed to have to yet again commence legal proceedings, on this occasion no fewer than six times, against a major bank. The conduct and breaches alleged in these proceedings caused widespread consumer harm and ranged across Westpac’s everyday banking, financial advice, superannuation and insurance businesses," Court says.
"A common aspect across these matters has been poor systems, poor processes and poor governance, which is suggestive of an overall poor compliance culture within Westpac at the relevant time. Customers are entitled to have trust and confidence in Westpac being able to deliver what it promises, without suffering financial harm. Westpac must urgently improve its systems and culture to ensure these systemic failures do not continue."
ASIC is filing multiple proceedings simultaneously due to exceptional circumstances, Court says.
"ASIC had numerous Westpac-related matters under investigation through the course of 2021, and we decided to expedite those matters for consideration by the Court at the earliest opportunity."
For its part Westpac says it has reached agreement with ASIC to resolve six separate longstanding matters through agreed proceedings filed in the Federal Court. The bank says the issues in question have all been previously disclosed.
"These matters follow regulatory investigations conducted by ASIC, many instigated following the issues being self-reported by Westpac, including some which were raised during the Royal Commission. The majority of affected customers have been compensated, and any remaining payments will be completed as quickly as possible," Westpac says.
Westpac says it and ASIC will jointly submit agreed proposed penalties for each of the proceedings, totalling A$113 million. The penalties are subject to court approval, with Westpac saying it has "substantially provisioned" for them in its 2021 annual financial results.
ASIC says Westpac has admitted the allegations in each of the proceedings and will pay about A$80 million to customers.
In NZ a damning independent report on Westpac NZ's risk governance, ordered by the Reserve Bank, was issued last week.
There are further details from ASIC below.
The six matters filed against Westpac concern:
Fees for no service – deceased customers: ASIC alleges that over a 10-year period, Westpac and related entities within the Westpac group, charged over $10 million in advice fees to over 11,000 deceased customers for financial advice services that were not provided due to their death.
General insurance: ASIC alleges that Westpac distributed duplicate insurance policies to over 7,000 customers for the same property at the same time, causing customers to pay for two (or more) insurance policies where they had no need for the additional policies. ASIC also alleges that Westpac issued insurance policies to, and sought payment of premiums from, 329 customers who had not consented to entering into an insurance policy.
Insurance in super: ASIC alleges that Westpac subsidiary BT Funds Management charged members insurance premiums that included commission payments, despite commissions having been banned under the Future of Financial Advice reforms. BT Funds Management represented that the insurance fees had been properly deducted from members accounts when in fact the insurance fees that were deducted included commissions that were not permitted. Some members also paid commissions to financial advisers via their premiums even though they had elected to have the financial adviser component removed from their account. BT Funds is remediating over $12 million to over 8,000 affected members who were incorrectly charged.
The Australian Prudential Regulation Authority (APRA) has also been reviewing these matters and ASIC and APRA have taken a coordinated approach to their respective inquiries.
Inadequate fee disclosure: ASIC alleges that Westpac licensees BT Financial Advice, Securitor and Magnitude (all no longer operating) charged ongoing contribution fees for financial advice to customers without proper disclosure. Some fees were not disclosed to the customer at all, at other times the amount disclosed was less than the amount charged. It is estimated that at least 25,000 customers were charged over $7 millon in fees that had not been disclosed, or adequately disclosed.
Deregistered company accounts: ASIC alleges that Westpac did not have appropriate processes to manage accounts held in the names of deregistered companies. As a result, Westpac allowed approximately 21,000 deregistered company accounts to remain open. Westpac continued to charge fees on those accounts and allowed funds to be withdrawn from these accounts that should have been remitted to ASIC or the Commonwealth.
Debt on-sale: ASIC alleges that Westpac sold consumer credit card and flexi-loan debt to debt purchasers with incorrect interest rates. These interest rates were higher than Westpac was contractually allowed to charge on at least part of the debts, resulting in more than 16,000 customers, who were likely to be in financial distress, being overcharged interest. Westpac and/or the debt purchasers have refunded over $17 million to affected customers.
ASIC further alleges that in all matters, excluding Debt on-sale and Insurance in super, Westpac failed to ensure that its financial services were provided efficiently, honestly and fairly.
The full list of Westpac businesses against which the allegations are made are:
- Westpac Banking Corporation
- Advance Asset Management Limited
- Asgard Capital Management Limited
- BT Funds Management Limited
- BT Funds Management No. 2 Limited
- BT Portfolio Services Limited
- Securitor Financial Group Pty Limited
- Magnitude Group Pty Ltd