The Federal Court has ordered National Australia Bank (NAB) to pay an $18.5-million penalty for misleading its customers by not adequately making fee disclosures.
The Court also found the bank contravened its obligations as a financial services licence holder to “act efficiently, honestly and fairly by failing to have procedures and systems in place to provide timely and effective fee-disclosure statements”.
Sarah Court, Deputy Chair of the Australian Securities and Investments Commission (ASIC), said NAB’s system failures resulted in significant fee disclosure failures over an extended period.
This had caused harm to customers as the inaccurate information meant they couldn’t make informed decisions about the financial services they were paying for.
“The penalty of $18.5-million handed down to NAB is a timely reminder to financial services licensees to ensure they meet their obligations to their clients,” Ms Court stated.
Charged fees but failed to advise clients
According to the Federal Court, the bank breached the law on numerous occasions when it charged fees for personal advice without giving customers compliant fee-disclosure statements.
It also failed to provide fee-disclosure statements to clients within the time required, and made false or misleading representations to clients in fee-disclosure statements about the amount clients had paid for services.
The Court also found NAB had not established or maintained systems and procedures to identify whether services were provided in accordance with client-service agreements.
It had also failed to ensure its fee-disclosure statements were compliant; and had failed to identify instances where it was prohibited from charging service fees.
“Customers need to have confidence in their financial services providers that they will be charged correctly for the services they receive and given accurate and timely information,’ concluded the ASIC Deputy Chair.
Bank did admit its liability, court says
In her decision, Justice Davies observed that fee-disclosure statement obligations “are specific consumer-protection measures enacted for the safeguard of the interests of clients subject to ongoing fee arrangements and they are strict obligations, underscoring the seriousness of the contravening conduct”.
The Court acknowledged NAB’s efforts to make early admissions of liability and took this into account in determining penalty. This is the first penalty imposed by the court for fee-disclosure statements failures under the Corporations Act.
NAB has been ordered to pay ASIC’s costs in bringing the matter to court.
In a media statement released following the Federal Court’s judgement, NAB Group Executive, Legal and Commercial Services, Sharon Cook said: “We sincerely apologise to those customers who were impacted by this issue.
“To address this issue, NAB stopped charging ongoing service fees to customers of its former NAB Financial Planning business in 2019. In 2020, we established a remediation program which has to date paid approximately $31-million to more than 15,000 customers in order to make things right.”