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Justice Jonathan Beach has handed down his decision in the last of six separate civil penalty proceedings filed by ASIC in the Federal Court against Westpac, penalising the bank $40 million for charging financial advice fees for no service to more than 11,800 dead customers.
The conduct had occurred across Westpac and related entities over a 10-year period, where more than $10.9 million in advice fees had been charged, despite the services not being provided due to the customers’ death.
The $40-million charge will contribute to $113 million in total fines across the six lawsuits.
Across all of the matters, Justice Beach had noted that systems and compliance failures had been a common feature.
In the newest judgement, he commented Westpac and its related entities had “utterly failed to address the issues systemically”.
Similarly, ASIC deputy chair Sarah Court stated the breaches across all six cases demonstrated a “profound failure by Westpac over many years and across many areas of its business to implement appropriate systems and processes to ensure its customers were treated fairly”.
“Over the course of 13 years, more than 70,000 customers have been affected by these failures, either by being incorrectly charged or given the wrong information,” Ms Court said.
“The sheer scale of this impact suggests that, at the time, Westpac had a culture that did not prioritise compliance.”
She added the royal commission had seen law reforms introduced to prevent harm, but Westpac’s misconduct, including the charging of advice fees to deceased customers, had continued.
“Westpac, like all licensees, has an obligation to be honest and fair in its provision of financial services,” Ms Court said.
“Despite this, Westpac failed to prioritise and fund the systems upgrades necessary to help fulfil this obligation.”
The other five matters against Westpac concerned:
- General insurance, with a $15 million penalty
Westpac had distributed duplicate insurance policies to more than 7,000 customers for the same property at the same time, including 3,899 customers since 30 November 2015.
As a result, customers paid for two or more insurance policies, where they had no need for additional policies.
Westpac also issued insurance policies to 329 customers who had not consented to entering into an insurance policy. - Inadequate fee disclosure, with a $6 million penalty
Westpac and advice businesses Securitor and Magnitude charged ongoing contribution fees for financial advice to retail customers without disclosing, or properly disclosing those fees.
It is estimated that over eight years, at least 25,000 customer accounts were charged at least $10.6 million in fees that were not disclosed, or properly disclosed. - Deregistered company accounts, with a $20 million penalty
Westpac allowed approximately 21,000 deregistered company accounts, holding approximately $120 million in funds, to remain open and continued to charge fees on those accounts.
Westpac allowed funds to be withdrawn from these accounts that should have been remitted to ASIC or the Commonwealth.
Justice Beach found that Westpac knew its systems were inadequate, did not fix those systems in a timely fashion and benefited from its own conduct. - Debt onsale, with a $12 million penalty
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. - Insurance in super, with a $20 million penalty
Westpac subsidiary BT Funds Management charged members insurance premiums that included commission payments, despite commissions being banned under the Future of Financial Advice (FOFA) reforms.
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.
Over 9,900 BT Funds members were affected.
The ruling has come after Westpac was recently slapped with a $1.5 million fine for mis-selling consumer credit insurance with its credit cards and Flexi Loans.
On Thursday (21 April), the group warned that its net profit and cash earnings for the first half of the 2022 financial year would cop a $6 million hit due to notable items.
The items included $65 million in provisions for customer refunds, repayments, associated costs and litigation penalties, as well as the sales of businesses across life insurance, vehicle dealer finance, novated leasing and superannuation.
The bank had issued consumer credit insurance policies to 141 customers who did not request the product in 2015, before debiting payment of the amounts from the customer’s credit card or facility.
Previously, Westpac’s Kiwi arm has faced similar criticisms from the Reserve Bank of New Zealand around compliance, after an independent review found there had been historic underinvestment in risk management capabilities across the group.
ASIC also recently launched a lawsuit against Macquarie Bank, alleging the lender had failed to monitor third-party withdrawals from customer accounts.
[Related: Mutual banks want consumer credit law review]
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