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CBA ups remediation bill for advice

The Commonwealth Bank of Australia has announced an extra $300 million has been added to its remediation bill in relation to ongoing service fee and customer remediation costs.

CBA said it is constantly addressing the full range of remediation issues impacting its customers of its aligned advice businesses including Count Financial, Financial Wisdom and Commonwealth Financial Planning.

"The estimates of provisions for customer remediation payments in relation to ongoing service fees have been revised to reflect the latest information on the ongoing service fee population, and updates to the remediation methodology and estimated refund rate," the bank said in a statement to the ASX.

"CBA has therefore recognised in operation expenses additional pre-tax customer remediation provisions of $300 million across our aligned advice businesses for the financial year ended 30 June 2020."

The additional costs have brought the banks total remediation bill across its advice practices to $834 million, including $698 million in customer refunds and $136 million in program costs.

The bank said the updated provisions assumes an average refund rate of 37% (excluding interest) of the outgoing service fees collected between FY09 and FY19, with 61% including interest.

"While these additional provisions are estimates that may change, CBA believes it has adequately provided for these issues," the bank said.

"CBA will continue to monitor the adequacy of these provisions."

The announcement was welcomed by CountPlus, which it said is in line with the intent and terms of its acquisition of Count Financial.

CountPlus holds an 85% stake in Count Financial and together with a special purpose subsidiary of a discretionary trust; CountPlus acquired the firm from CBA on 1 October 2019.

"In connection with the acquisition, CBA provided an indemnity to cover remediation of past conduct, up to a maximum of $200 million," CountPlus said.

"On 31 December 2019, CountPlus reported, in its consolidated accounts, a provision for remediation of past conduct of $143.3 million with a corresponding asset due to the CBA indemnity provided."

CountPlus said based on the information by CBA the Count Financial remediation provision is expected to be revised to $195 million.

CountPlus added it has entered into a new agreement with CBA to further increase the limit of indemnity provided to $300 million.

"The potential for further increases to the indemnity limit remains under certain triggers relating to the failure for fee for no service and inappropriate advice," CountPlus said.

"Remediation amounts will not be known until individual cases have neem reviewed and compensation offers made."

Read more: CBACountPlusCount FinancialCommonwealth Bank of AustraliaCommonwealth Financial PlanningFinancial Wisdom
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