Aggregated News From Investment Management Regulators

CBA liable for overcharged interest – Royal Commission case study

Report/Flag

Please complete the required fields.



The Federal Court has made declarations that the Commonwealth Bank of Australia (CBA) made false or misleading representations and engaged in misleading and deceptive conduct on 12,119 occasions when charging a rate of interest on business overdraft accounts substantially higher than what its customers were advised.

The Court also made a declaration that on each of the 12,119 occasions that CBA breached s12DA(1) and s12DB(1)(g) of the ASIC Act, it also breached its general obligation as a financial service licensee to comply with financial services laws, in contravention of s912A(1)(c) of the Corporations Act.

ASIC alleged, and CBA admitted, that from 1 December 2014 to 31 March 2018, CBA:

  • provided customers with terms and conditions for certain credit facilities that stated an interest rate to be charged or that had been charged (in most cases, 16% per annum)
  • sent periodic account statements to customers referencing the rate at which interest rate was being charged (in most cases, 16% per annum), and
  • due to a systems error, charged more than 1,510 customers a different, higher interest rate on their overdraft accounts (in most cases approximately 34% per annum).

The total overcharged interest exceeded $2.2 million. ASIC considers that CBA’s conduct in this matter, which was examined in detail during the Financial Services Royal Commission, resulted from inadequate systems and processes ().

ASIC Commissioner Sean Hughes said ‘Financial services institutions need to have appropriate systems, governance and controls in place to ensure they deliver on promises made to their customers. By CBA failing to take adequate steps to rectify this error after it was identified, this resulted in customers continuing to be overcharged.

‘Investment in good systems needs to be prioritised by all financial services institutions to ensure trust in our financial system is re-built and to avoid a repeat of these failures in the future.’

ASIC will seek pecuniary penalties and other orders against CBA at a penalty hearing on 6 April 2021.

Download

Court order

Background

ASIC commenced proceedings against CBA on 30 November 2020 ().

CBA’s conduct was the subject of a case study by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry – see Volume 2 of the Interim Report (page 304-308).

CBA has set up a remediation program that has so far compensated $3.74 million to the customers impacted in this case.

ASIC previously obtained a $5 million penalty against CBA for failures of their AgriAdvantage Plus Package. These failures included, amongst other things, overcharged interest on loans and fees ().

This news item was originally published by the Australian Securities and Investments Commission (ASIC AU). For more information, please see the Source Link.

Regulator Information

Abbreviation: ASIC
Jurisdiction: Australia

Recent Articles

Implications of Russia’s invasion of Ukraine on half-yearly financial reports

See the Public Statement published by the Cyprus Securities and Exchange Commission (CySEC CY) here: Source link

Movement In Island’s Deposit Base

Published on: 20 May 2022 Deposits (net of local inter-bank placings) with Isle of Man offices of Isle of Man licensed deposit takers Deposits increased by £0.96 billion (2.58%) to £38.

Streamlining the Process of Rights Issue

This news item was originally published by the Securities and Exchange Board of India (SEBI IN). See the article here: Read more

LCG.fit (Clone of FCA authorised firm)

Fraudsters are using the details of firms we authorise to try to convince people that they work for a genuine, authorised firm. Find out...

Acadian-Asset.management (clone of FCA authorised firm)

Fraudsters are using the details of firms we authorise to try to convince people that they work for a genuine, authorised firm. Find out...

Get the latest from Regulatory.News in your inbox!

×