CBA Ordered to Pay A$5m Over Agricultural Lending Products

Source: Regulation Asia Editors, Regulation Asia 2020-06-09

CBA’s failures were attributed to the highly manual nature of the systems it used to apply package benefits, and the lack of systems or processes to check whether customers were receiving said benefits.

The Federal Court of Australia has ordered CBA (Commonwealth Bank of Australia) to pay a AUD 5 million (UDS 3.5 million) penalty amid findings that the bank overcharged clients fees and interest on a class of its agricultural lending products.

In a case referred from the Royal Commission, CBA was found to have breached the ASIC Act and Corporations Act for failures in its ‘AgriAdvantage Plus Package’, which was sold to customers between May 2005 to December 2015, entitling them to benefits in the form of fee waivers, interest rate discounts and bonus interest on savings, in exchange for the payment of package fees on 22 CBA products.

ASIC (Australian Securities and Investments Commission) launched civil proceedings against CBA in March, alleging that customers did not receive the benefits they were entitled to, and seeking a civil penalty up to AUD 5 million.

CBA admitted it did not provide certain benefits to customers and, as a result, customers were overcharged fees and interest on loans and fees, and underpaid interest on savings. The bank also overcharged AA+ Package fees to certain customers.

The failures were attributed to the highly manual nature of the systems CBA used to apply the AA+ Package benefits, and the lack of systems or processes in place to check whether customers were receiving benefits.

A total of 8,659 customers were impacted by CBA’s conduct on 131,542 occasions, in circumstances where the bank benefited from over AUD 8 million in incorrectly charged fees and interest on loans, and underpaid interest on savings.

The Court found breached obligations to provide financial services efficiently, honestly and fairly, and ordered the bank to publish a corrective notice and pay a pecuniary penalty of AUD 5 million.

“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’,” the Court found.

“CBA did not defend the proceedings and accepts the penalty as appropriate in this case,” said a statement from the bank. “We apologise to those customers who at the time didn’t receive their AgriAdvantage Plus package benefits or were overcharged fees.”

“We have sent refunds of approximately $8 million (including interest) and there were 8,659 customers impacted. Failures of this sort are unacceptable.”

CBA

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ASIC

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The Federal Court of Australia

CBA Ordered to Pay A$5m Over Agricultural Lending Products

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