ASIC has announced that it has commenced proceedings in the Federal Court against Commonwealth Bank of Australia (CBA) for alleged breaches of the ASIC Act and Corporations Act for failures of its AgriAdvantage Plus Package (AA+ Package).

UPDATE June 2020: penalty decision.

ASIC alleges that:

• from May 2005 to December 2015, CBA sold customers the AA+ Package, which entitled customers, in exchange for the payment of package fees, to benefits in the form of fee waivers and interest rate discounts, and bonus interest on savings, on 22 CBA products;
• contrary to the terms of the AA+ Package, CBA harmed customers by not providing certain benefits to customers and, as a result, customers were overcharged fees and interest on loans and fees, and underpaid interest on savings. CBA also overcharged AA+ Package fees to certain customers.

ASIC contends that a total of 8,659 customers were harmed by CBA’s conduct on 131,542 occasions, in circumstances where CBA benefited from a total of $8,087,276 in incorrectly charged fees and interest on loans, and underpaid interest on savings.

ASIC claims that CBA’s failures arose out of CBA’s continuing failure over the Relevant Period to establish and maintain appropriate systems and processes to ensure it could provide the AA+ Package Benefits in accordance with the AA+ Package Terms and Conditions; in particular:
(a) the provision of AA+ Package Benefits involved highly manual processes that relied on a Relationship Manager establishing the product correctly and ensuring AA+ Package Benefits were applied;
(b) the AA+ Package was also complex to administer in a highly manual environment, in that the AA+ Package offered benefits on 22 CBA products, with many offering a different, or multiple, benefits to the customer;
(c) there was a poor control environment with no adequate system for reporting issues with the package or monitoring of any complaints about the package, or auditing of the package, and with there being no team or person responsible for the AA+ Package;
(d) there were inadequacies in the complaints handling system in that CBA did not have systems in place to identify complaints made about the AA+ Package;
(e) there was no appropriate IT systems to administer the product, with multiple systems being used and not all products sitting on the same IT system;
(f) CBA did not establish any business unit, team or person who was ultimately responsible for ensuring that the AA+ Package Benefits were being applied to the Relevant Products held by customers in accordance with the AA+ Package Terms and Conditions.

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Author: David Jacobson
Principal, Bright Corporate Law
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The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.