iscover
iscover 
The Commonwealth Bank of Australia (CBA) is being taken to Federal Court by the Australian Securities & Investments Commission (ASIC).
The regulator has alleged that between 1 June 2010 and 11 September 2019, the bank incorrectly charged monthly access fees to nearly 1 million customers and more than 800,000 accounts.
According to ASIC, the customers in question were entitled to waivers of the monthly fees (usually between $4-$6) because they met certain criteria under their contracts with the bank.
For example, CBA’s terms and conditions stated that a waiver would apply where a customer deposited a minimum amount into the account each month, or if the customer was a student.
However, due to system issues, these waivers were not applied.
ASIC has estimated that the incorrect fees charged amounted to approximately $55 million.
For the period between 1 April 2015 and 11 September 2019, the period for which the federal court can impose a penalty, ASIC alleges that CBA incorrectly charged monthly access fees on approximately 2.4 million occasions, totaling around $11.5 million.
How the issue occurred
The regulator has suggested that the fees were incorrectly charged “due to systems and processes that were inadequate or improperly configured in 30 different ways, as well as due to manual errors made by CBA staff”.
ASIC does not allege that any of the contraventions were deliberate.
CBA first identified problems with its systems which caused the overcharging in January 2011. Indeed, it is thought to have received approximately 14,000 complaints from customers about the fee overcharging from June 2010 to May 2019.
The major bank reportedly notified ASIC of the issue in December 2018. It lodged its first of a number of breach reports with ASIC in May 2019, according to the regulator.
ASIC noted that the bank has so far undertaken remediation for the majority of customers impacted by the incorrect fee charging.
As at December 2020, CBA had paid almost $65 million in remediation to almost 1 million customers who were overcharged.
Of the total remediation payments, approximately 90 per cent related to two fee waiver issues that were identified in 2017 and 2019.
In a statement acknowledging the civil penalty proceedings, CBA said the proceedings “relate to errors by CBA” where monthly account fee waivers were not applied to accounts for certain customers.
“CBA accepts these errors should not have occurred and has provided several breach reports to ASIC in relation to these issues,” the bank said in a statement.
“CBA apologises to all customers impacted by these issues.”
It added that the remediation of customers affected by the issues in these proceedings has been completed.
“CBA continues to invest in strengthening its systems and procedures,” it said.
What laws were allegedly broken?
Given the incorrect charges, ASIC is alleging contraventions of certain misleading and deceptive conduct provisions of the ASIC Act and breaches of the general obligations owed by financial services licensees under the Corporations Act.
It alleges that each time CBA charged the fees or notified a customer via bank statement of the charging of each fee, it made false or misleading representations that it was contractually entitled to charge the fees when it was not.
Similarly, the regulator has said that the bank made false or misleading representations when entering into a contract with a customer to establish an account where a fee waiver may apply. ASIC says that this was because it made false or misleading representations that it would have adequate systems and processes in place to provide the fee waivers, when it did not.
By engaging in the above conduct, ASIC alleges that CBA also engaged in “misleading or deceptive conduct and contravened its obligation as an Australian financial services licensee to comply with financial services laws”.
ASIC also alleges that CBA failed to provide financial services “efficiently, honestly and fairly” by failing to apply the waivers after representing that it would; failing to maintain systems that were able to meet its obligations to costumers; and failing to “undertake an appropriate review of the multiple systemic issues that contributed to the ongoing failure of its systems to apply monthly access fee waivers in accordance with the bank’s contract with its customers”.
“ASIC commenced this proceeding because financial institutions need to have robust compliance systems to meet their obligations to customers,” the regulator said.
“Financial institutions need to put customers first, and customers should have confidence that the banks they deal with charge fees correctly.”
The Commonwealth Bank has stated that while it accepts the error should not have occurred, it “does not accept the way that the alleged contraventions have been formulated in the proceedings”.
The bank said it would therefore defend the matter in court.
The proceeding will be listed for a case management hearing on a date yet to be set.
The matter is the latest in a string of proceedings brought by ASIC against major banks, as part of its work to ensure banks have robust compliance systems that enable them to meet their obligations to customers.
The regulator recently commenced court action against NAB for similarly charging fees to personal banking and business banking customers when it was not contractually entitled to do so.
Last year, it also successfully sued CBA for charging fees to customers entitled to fee waivers under its AgriAdvantage Plus package (resulting in a $5-million penalty) and ANZ for unconscionable conduct over account fees (resulting in a $10 million penalty).
[Related: ASIC sues major bank]
ISCOVER 
