A second lender is being forced to pay millions after entering into an enforced undertaking (EU) with the Australian Securities and Investments Commission (ASIC).
The news came just a week after ANZ also entered into an EU with ASIC.
An investigation was launched after Commonwealth Bank of Australia (CBA) informed ASIC that some customers did not receive an annual review as part of the financial advice service package they paid for.
It found that two of Commonwealth Bank of Australia’s (CBA) subsidiaries had failed to provide, or failed to locate evidence regarding the provision of, annual reviews to approximately 31,500 'Ongoing Service' customers.
This occurred between July 2007 and June 2015 for Commonwealth Financial Planning Limited (CFPL) and between November 2010 and June 2015 for BW Financial Advice Limited (BWFA).
The EU requires both subsidiaries to pay $3m in community benefit as well as compensation, but as BWFA ceased trading in October 2016 the EU only requires CFPL to make improvements to their processes.
As part of the process, CBA has said in a statement it is working with an expert to verify that the current processes are of the correct standard. It must also take steps to identify and remediate the customers who did not receive a report.
ASIC Deputy Chair Peter Kell said: “Our report into Fees For No Service in October 2016 identified the major financial institutions' systemic failures in this area, and called for fair compensation to be paid to customers who did not receive the advice reviews that they were promised and paid for.
“This enforceable undertaking follows on from the earlier enforceable undertaking accepted by ASIC in relation to ANZ's fees for no service conduct. These failures show that all too often the financial institutions prioritise revenue and fee generation over the delivery of advice and services paid for by their customers.”
CBA has worked with independent experts, Deloitte and EY, to develop and implement an Advice Fee Refund program. It has involved reviewing approximately 62,000 customer files and making payments of around $88m to affected customers.
CEO Matt Comyn said: “We recognise the fact that we have failed customers in our advice businesses over the past decade. These failures have resulted in a range of regulatory actions including imposition of licence conditions and remediation programs.
“This is unacceptable and we owe our customers an apology for letting them down. Providing quality financial advice is critical for our customers. “