CBA, Colonial First State settle class action for $249m

Commonwealth Bank (CBA), together with Colonial First State Investments (CFSI) and Avanteos Investments, have agreed to settle the long-running Interest Rates Class Action for $249 million but deny wrongdoing.

The class action spearheaded by Slater & Gordon in 2018 alleges CBA and CFSIs breached the trust of their superannuation fund members by investing members' retirement savings with its parent bank even though the bank didn't offer the best interest rates.

The class action targeted three CFS super funds - FirstChoice, Commonwealth Essential Super and the Avanteos Superannuation Trust. Members in the class action were invested in certain cash and deposit options during the period November 2008 and September 2021.

It is also alleged that CFSI/Avanteos breached their duties as a trustee of the funds and CFSI breached its duties as the responsible entity of the underlying managed investment schemes.

CBA as the parent company at the time was also allegedly instrumental in CFS's and Avanteos' breaches.

The three parties deny the allegations.

Today, CBA announced that it "in principle" agreed to settle the class action.

"In agreeing to resolve the proceedings, CBA, CFSIL and AIL continue to deny the allegations and make no admission of liability or wrongdoing," the bank said.

The Federal Court of Australia has yet to approve the settlement sum of $249 million.

CBA completed the divestment of a 55% interest in Colonial First State to KKR on 1 December 2021. This included CFSIL and Avanteos.

Last November, CBA also settled a financial advice class action in in-principle for $22.5 million relating to Commonwealth Financial Planning (CFP), Financial Wisdom and its life insurance business Colonial Mutual Life Assurance Society (CMLA).

Shine Lawyers alleged that CFSI as the superannuation provider, arranged group insurance policies with CommInsure that charged fees that were not in members' best interests. It also alleged that similar, cheaper policies were available through other providers.

Authorised representatives from CFP and FWL were alleged to have breached their fiduciary duties to their clients, breached their duty to act in the best interests of their clients, and had prioritised their own interests over their clients, in recommending certain CMLA life insurance policies in preference over substantially equivalent or better policies available at lower premiums from third-party insurers.

CBA finalised its divestment of CMLA to AIA Australia in 2021.