ASIC hits Westpac with multiple legal actions

"Widespread compliance failures" could prompt more than $100 million in penalties

ASIC hits Westpac with multiple legal actions

The Australian Securities and Investments Commission has launched multiple legal actions against Westpac over what the regulator called “widespread compliance failures across multiple Westpac businesses.”

ASIC has commenced six civil penalty proceedings against the banking giant in the Federal Court. The conduct alleged in the actions “occurred over many years and affected many thousands of consumers,” ASIC said.

The regulator has made allegations against Westpac businesses including its banking, superannuation and wealth management brands, as well as the bank’s former general insurance business.

“ASIC is disappointed to have to yet again commence legal proceedings, on this occasion no fewer than six times, against a major bank,” said Sarah Court,  ASIC deputy chair. “The conduct and breaches alleged in these proceedings caused widespread consumer harm and ranged across Westpac’s everyday banking, financial advice, superannuation and insurance business.”

Court said that a common aspect across the proceedings has been “poor systems, poor processes and poor governance,” which she said suggested “an overall poor compliance culture within Westpac” at the time of the alleged infractions.

“Customers are entitled to have trust and confidence in Westpac being able to deliver what it promises, without suffering financial harm,” she said. “Westpac must urgently improve its systems and culture to ensure these systemic failures do not continue.

“It is unprecedented for ASIC to file multiple proceedings against the same respondent at the same time,” Court said. “However, these are exceptional circumstances. ASIC had numerous Westpac-related matters under investigation through the course of 2021, and we decided to expedite those matters for consideration by the court at the earliest opportunity.”

Westpac has admitted the allegations in each of the proceedings and will remediate about $80 million to customers, ASIC said. ASIC and Westpac will submit to the court that combined penalties of more than $100 million are appropriate.

Each matter will be separately considered and determined by the court, ASIC said.

The six matters filed against Westpac relate to:

  • Fees for no service – deceased customers: ASIC alleges that over a 10-year period, Westpac and related entities charged more than $10 million in advice fees to more than 11,000 deceased customers for financial services that were not provided due to the customers’ death
  • General insurance: Westpac allegedly distributed duplicate insurance policies to more than 7,000 customers for the same property at the same time, causing customers to pay for two or more insurance policies when they had no need for additional policies. ASIC has also alleged that Westpac issued policies to – and sought payment from – 329 customers who had not consented to a policy
  • Insurance in super: Westpac subsidiary BT Funds Management allegedly charged members insurance premiums that included commission payments despite commissions having been banned under the Future of Financial Advice reforms. Some members also paid commissions to their financial advisors through premium payments even though they had elected to have the financial advisor component removed from their account. BT Funds is remediating more than $12 million to more than 8,000 members who were incorrectly charged
  • Inadequate fee disclosure: Westpac licensees BT Financial Advice, Securitor and Magnitude (none of which are still operating) allegedly charged ongoing contribution fees for financial advice without proper disclosures. Some fees were not disclosed to customers at all; at other times, the amount disclosed was less than the amount charged. ASIC estimated that at least 25,000 customers were charged over $7 million in fees that were inadequately disclosed or not disclosed at all
  • Deregistered company accounts: ASIC alleged that Westpac lacked appropriate processes to manage accounts held in the names of deregistered companies. As a result, the bank allowed approximately 21,000 deregistered company accounts to remain open. Westpac continued to charge fees on those accounts and allowed funds to be withdrawn that should have been remitted to ASIC or the Commonwealth
  • Debt on sale: Westpac allegedly sold consumer credit card and flexi-loan debt to debt purchasers with incorrect interest rates. The rates were higher than Westpac was contractually allowed to charge on at least part of the debts, resulting in more than 16,000 customers being overcharged interest. Westpac and the debt purchasers have refunded more than $17 million to affected customers

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ASIC also alleged that in all matters except “debt on sale” and “insurance in super,” the bank failed to ensure that its financial services were provided efficiently, honestly and fairly.

The Westpac businesses against which the allegations were made are:

  • Westpac Banking Corporation
  • Advance Asset Management Limited
  • Asgard Capital Management Limited
  • BT Funds Management Limited
  • BT Funds Management No. 2 Limited
  • BT Portfolio Services Limited
  • Securitor FInancial Group Pty Limited
  • Magnitude Group Pty Ltd