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BFCSA: Banking royal commission: Hayne releases NAB's shame file

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Banking royal commission: Hayne releases NAB's shame file

Australian Financial Review Aug 15 2018 6:17 PM

James Frost


An explosive report from ASIC into NAB's fees-for-no-service scandal reveals a regulator furious at the bank's failure to acknowledge the serious and systemic failings in relation to an overcharging issue at the bank dating back up to 15 years.

Titled "Outline of suspected offending by the NAB Group", the report from ASIC lashes the bank's failure to put in place controls that would prevent customers for being charged with fees for services it did not provide and an apparent total disregard for compliance.

Dated October 2017, the report reveals ASIC has deployed its compulsory powers to investigate the matter which include the ability to compel bank employees to attend interviews under Section 19 of the ASIC Act. ASIC has confirmed the investigation is ongoing.

The list of NAB entities named in the report includes MLC, Navigator, NULIS, Apogee Financial Planning, Godfrey Pembroke, GWM Adviser Services, Meritum Financial Group and National Wealth Management Services. The document spells out each incident of concern, with the earliest dating back to April 2004.

"Those entities have, by their own admission, fallen below the standard expected of a responsible Australian financial services licensee. In short, they have failed to do all things necessary to ensure that the financial services provided by them are done so efficiently, honestly and fairly" the report reads.

The report also details "various breakdowns in fundamental systems and controls" that allowed the bank to charge fees known as Plan Service Fees and Adviser Service Fees in situations where it had no right too. Complaints data from the bank's own files is also contained in the document where the son of a NAB customer protests about "an ongoing service fee of 1.1 per cent on the clients account for the past 15 years without ongoing service provided."

Complaints such as "Client would like a refund of all adviser fees paid from 2006 to now due to lack of service from the adviser" and "Client is seeking refund of annual adviser fees from 2008 as she alleges she's received no advice" are typical of those in the report.

The report was the subject of extensive debate at the Hayne royal commission on day three of the superannuation hearings where the bank tried to claim legal and professional privilege over a series of documents which consisted of NAB's communication with - and about - ASIC.

Commissioner Hayne rejected the bid for secrecy saying it as in the public's interest to have a transparent and open inquiry that revealed how the regulated dealt with the regulator.

The paragraphs from the report which NAB tried to keep secret were ASIC's total dissatisfaction with the manner in which NAB tried to advance the idea of a "fair exchange of value" where it could substitute the services it promised to provide with other services - such as access to a phone number or a website.

"ASIC disagrees with NAB's view that it should test whether there was a customer adviser interaction, rather than whether NAB delivered on the express commitments it gave to its customers.

It was further incensed by the bank's repeated attempts to propose an opt-in approach to compensation where customers would have to self identify they did not receive services which would have the impact of reducing the bank's compensation bill.

"ASIC is concerned that NAB's interpretation of its obligations means that NAB will fail to identify and compensate customers who did not receive the ongoing services they paid for."

The issue of the quantum of the bank's fee-for-no-service compensation bill was discussed in great detail with NAB's chief customer officer Andrew Hagger during his second appearance at the royal commission earlier this week. At issue was how the bank downplayed the scale of the problem with the regulator.

Emails between the bank's executive team over the weekend of October 22, 2016 or right before the regulator released a report into fees for no service were also published by the royal commission.

NAB had given the regulator a figure of $11.7 million for compensation which put the bank in "the middle of the pack" but knew the figure would rise significantly in the days that followed.

Mr Hagger emailed to say he would call ASIC on Monday and give them the new figure "in the ongoing interests of openness and transparency" but doubted "they will wish to shoe-horn the matter into their report given deadlines" and "the very substantial rewrite" the new data would require.

The hearings into superannuation will continue until Friday at the Commonwealth Courts building in Melbourne.

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