ASIC has trumped the Commonwealth Bank for failures in its AgriAdvantage Plus Package, with the Federal Court of Australia ordering the bank to cough up a $5 million penalty.
On Friday, the Court found that the bank had breached the ASIC Act and Corporations Act between May 2005 and December 2015 for failures relating to the package.
CBA sold the AA+ Package to customers during the 10-year period, which promised them benefits in the form of fee waivers, interest rate discounts and bonus interest on savings in exchange for package fees on 22 of the bank's products.
A total of 8659 customers were impacted by CBA's conduct on 131,542 occasions during the period, with CBA banking $8,087,276.23 in incorrectly charged fees, interest on loans, and underpaid interest on savings.
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During the proceedings, CBA admitted to not providing the benefits laid out in the terms of the package, with customers instead facing overcharged fees, interest on loans and fees, and underpaid interest on savings.
The bank attributed the failure to "the highly manual nature" of systems surrounding the package, as well as "CBA having no systems or processes in place to check whether customers were receiving benefits".
ASIC deputy chair Daniel Crennan agreed that the bank's conduct was the result of inadequate internal processes.
"ASIC considers that CBA's conduct in this matter, which was examined in detail during the Financial Services Royal Commission, was the result of inadequate systems and processes," he said.
"Because of its conduct, CBA failed to deliver its AgriAdvantage package efficiently, honestly and fairly as it was obliged to do under s912A of the Corporations Act.
"As a result, over 8000 customers were affected."
The Court found that the bank had contravened section ss12DA(1), 12DB(1)(e) and (g), 12DI(3) of the ASIC Act and 912A(1)(a) and (c) of the Corporations Act.
The Judge said CBA had breached its obligation to do "all things necessary" to ensure that the services covered by its AFSL were provided fairly, honestly and efficiently, with the failures arising from the bank negligence in establishing and maintaining systems to ensure it could provide the benefits of the package.
Despite the misconduct and large number of customers impacted by the AA+ Package, ASIC said the $5 million penalty was appropriate.
"A pecuniary penalty of $5 million is appropriate having regard to the number of contraventions, the prejudice to customers, the duration of the contraventions and the inadequacy of CBA's internal systems and processes," ASIC said.
"The penalty imposed recognises the gravity of the contraventions that occurred whilst taking into account the 'very substantial mitigating circumstances', including that the contravening conduct was not deliberate and that there has since been 'complete rectification and remediation'."
Crennan argued the bank had taken appropriate steps to address the harm caused by the package, and encouraged other regulated entities to make admissions over failures to avoid heftier penalties.
"As recognised by Justice Beach in his judgment, CBA took steps to address the harm that the conduct caused and, importantly, made admissions as to its contraventions of the law at the first possible opportunity in the litigation," he said.
"ASIC's expectation of the entities that it regulates is that, in appropriate circumstances, when ASIC issues proceedings against them, they ought to make admissions and engage in the penalties process at the earliest possible opportunity."