ASIC has expressed its frustration over the “unreasonably delayed” response to the fees for no service (FFNS) review that six of Australia’s major banking and financial services institutions were directed to carry out.
ASIC’s efforts to combat FFNS have been two-pronged. First, the institutions in question were asked to identify and implement the best way to compensate their impacted customers. Secondly, they were to carry out independent reviews to identify further FFNS failures within their own organisations.
Since ASIC last reported on FFNS failures in 2013, all six institutions in question – AMP, ANZ, CBA, Macquarie, NAB and Westpac – have failed to carry out either of these measures beyond what was directly enforced by the regulatory body.
“ASIC acknowledges that these are large scale reviews – they relate to systemic failures over long periods with reviews going back six to 10 years and covering 36 licensees that currently authorise more than 7,000 advisers,” said ASIC commissioner Danielle Press.
“However, we believe the institutions have failed to sufficiently prioritise and resource their reviews, particularly as ASIC advised them to commence the reviews in mid-2015 or early 2016,” she continued.
The delays have been attributed to everything from “poor record-keeping” to a failure to figure out a method to compensate customers, despite ASIC having provided a “clear articulation of expectations.”
Several of the institutions proposed processes that were rejected by ASIC, such as requiring customers to opt-in to be part of the remediation process or evaluating if there had been a “fair exchange of value” rather than assessing if customers received the services that they paid for.
Already, the six institutions have collectively paid or offered around $350m to compensate affected customers. Rather than identifying measures to address the FFNS issue head on, the institutions have provisioned over $800m towards potential FFNS failures in the future.
In response to these lacklustre efforts, ASIC has been granted a directions power that will enable the regulator to direct AFS licensees to “establish suitable customer review and compensation programs.”
In this next round of FFNS investigations, ASIC “plans to take enforcement action” in response to any misconduct that is exposed.