National Australia Bank's wealth arm has been forced to pay $36.5 million to its customers, after wrongly charging fees to superannuation fund members and wrongly denying insurance claims.
The Australian Securities and Investments Commission on Thursday revealed the payments as it imposed extra licence conditions on the bank's superannuation trustee in response to "breakdowns" in its internal procedures.
Meanwhile Bankwest, a division of the Commonwealth Bank of Australia, has refunded $4.9 million to 10,800 customers after it failed to take into account customers' offset accounts when calculating interest on home loans.
Between late 2012 and October last year, NAB had overcharged 220,000 corporate superannuation accounts a combined $34.7 million, ASIC said. The overcharging occurred because of poor disclosure of what services members would receive.
The refund is approximately $150 per person, and about half of this compensation payment was revealed in a report from ASIC last October that uncovered widespread short-changing of customers in the major banks' wealth divisions.
Members were charged "planned service fees" under NAB's MLC MasterKey Business Super and MLC MasterKey Personal Super products, which should have given members access to general financial advice. However, the bank had failed to provide such advice, the watchdog said.
As well, ASIC said NAB had wrongly denied 10 insurance claims for death and total and permanent disablement cover between 2012 and 2015. It is also refunding affected customers for these errors, paying out $1.8 million.
In response to these flaws, NAB has commissioned an independent assurance review, to be carried out by KPMG, into the bank's superannuation business.
KPMG's review will investigate risk management procedures, its processes for implementing product changes, and how conflicts of interest are managed within this part of the bank.
NAB's acting executive general manager for wealth products, Garry Mulcahy, said the review was aimed at giving super customers more confidence in the bank's systems and processes.
"Over the past five years, we've made substantial changes to upgrade and simplify our superannuation business to better serve our customers' needs," Mr Mulcahy said.
"We've merged five of our super funds to create Australia's largest retail super fund, the MLC Super Fund, with $70 billion funds under management, and we've also implemented significant regulatory change, including Future of Financial Advice (FoFA) reforms and Stronger Super."
The NAB errors were revealed by ASIC as it also said Bankwest had wrongly calculated $4.9 million in home loan interest for customers with offset accounts, leading to refunds for 10,800 clients.
The breach has meant that some customers who opened accounts between 2007 and 2016 were overcharged interest on their home loans.
Bankwest said it uncovered the problem several years ago and reported it to ASIC in March 2014.
It said it had since updated its systems and processes and alerted customers.
"Where there is evidence that an offset was requested, Bankwest has notified customers, linked the relevant accounts and refunded any interest which had been overpaid," Bankwest executive general manager of retail, Andrew Whitechurch said.
ASIC said in a statement the failure represented a significant breach of the bank's licence obligations.
"It is critical that licensees ensure that their systems work properly so that promises made to customers about their bank accounts are kept," ASIC deputy chairman Peter Kell said.
"When a problem is identified, licensees not only have an obligation to report the breach, but impacted customers must be returned to the position they would have been in, had the breach not occurred."
An offset account is a savings or transaction account linked to a home loan that is designed to reduce the interest on the home loan.This article was first publisher on www.smh.com.au
Authors: Clancy Yeates Georgia Wilkins