In Australian Securities and Investments Commission v Commonwealth Bank of Australia [2020] FCA 790 the Federal Court of Australia ordered CBA to pay a pecuniary penalty of $5 million to the Commonwealth for its conduct in relation to the AgriAdvantage Plus product (offered by CBA between May 2005 and November 2015) (AA+ Package).

Justice Beach found that CBA contravened sections 12DA(1), 12DB(1)(e), 12DB(1)(g) and 12DI(3) of the ASIC Act and that CBA breached its general obligation as a financial service licensee to comply with financial services laws in contravention of section 912A(1)(c) of the Corporations Act 2001.Background.  

CBA represented that the AA+ Package entitled customers to benefits in the form of fee waivers, interest rate discounts and bonus interest on savings, in exchange for the payment of package fees

In fact CBA 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. CBA also overcharged AA+ Package fees to certain customers.

The Court ordered CBA to pay the pecuniary penalty because it was found to have, between 16 March 2014 and 31 December 2015 (Penalty Period):
(a) made false or misleading representations to customers that CBA had adequate systems and processes in place to be able to provide customers the benefits offered under the AA+ Package and CBA would apply those benefits in accordance with the terms and conditions of the AA+ Package; and
(b) accepted payments from customers in exchange for CBA applying the benefits under the AA+ Package when there were reasonable grounds for believing that CBA would not be able to provide the benefits under the AA+ Package.

The Court found that, during the total period over which the AA+ Package was offered (May 2005 to 31 December 2015) (Relevant Period), a total of 8,659 customers were harmed by CBA’s conduct on 131,542 occasions, through incorrectly charged fees and interest on loans, underpaid interest on savings, and as a result of mischarging annual fees for the AA+ Package.

During the Penalty Period, CBA accepted payments of AA+ Package Fees from 6,953 customers for the provision of the AA+ Package Benefits. The total amount of Accepted Payments within the Penalty Period was $1,704,650.

CBA remediated the full amount of $8,087,267.23 (which included interest for the time that had passed) to its affected customers.

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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.