Major bank faces new class action

Class action firm Maurice Blackburn Lawyers filed the class action in the Victorian Supreme Court against two NAB group trustees, MLC Nominees Pty Ltd and NULIS Nominees (Australia) Ltd, on behalf of members of MasterKey Business Super and Personal Super account holders.

The class action alleges that MLC Nominees and NULIS failed to act and exercise their powers in the best interests of beneficiaries, exercise the degree of care, skill and diligence required of a prudent super trustee, and prioritise the interests of beneficiaries where a conflict of interest arose.

MLC Nominees was the trustee of The Universal Super Scheme, which in July 2016, merged with others to become the MLC Super Fund, of which NULIS was trustee.

The class action alleges contraventions of super law by MLC Nominees and NULIS, including that they left MasterKey Business Super and Personal Super default members “idling” in products with higher fees and paying commissions to financial advisers that were banned in the low-cost MySuper product.

MySuper reforms were introduced in 2013.

Andrew Watson, Maurice Blackburn’s national head of class actions, said the case will focus on NAB’s failure to transition over $6.3 billion of accrued default amounts (ADA) over to the lower-cost MySuper product in a timely way and in the best interests of super members.

“The contraventions at the heart of this case resulted in NAB’s default MasterKey super members paying higher fees and commissions and receiving lower investment returns for periods of time when they could have been in a cheaper, better, overall MySuper product,” Mr Watson said.

“This is another regrettable case of mismanagement in the superannuation sector. The whole point of the MySuper reforms was to make sure that millions of everyday Australians who hadn’t made an active decision about their super were not losing money on higher fees and unnecessary or unused services.

“MySuper was introduced to protect the retirement outcomes of Australians. MLC Nominees and NULIS’ job was to move default member balances into MySuper at the time that best met their members’ needs, not the needs of NAB or financial advisers.”

According to the law firm, members are eligible to join the NAB MySuper class action if:

• Their super was invested in the MLC MasterKey Business Super or the MLC MasterKey Personal Super product (MasterKey) and they held an accrued default amount in MasterKey that was transferred by NULIS to a MySuper product in the MLC Super Fund on or about 3 December 2016 or 25 March 2017; or
• They received payment from a deceased MasterKey member of all or part of their interest that was transferred by NULIS to a MySuper product in the MLC Super Fund on or about 3 December 2016 or 25 March 2017; or
• They were the spouse of a MasterKey member and under the Family Law Act or a super agreement, they received a transfer of the member’s interest that was transferred by NULIS to a MySuper product in the MLC Super Fund on or about 3 December 2016 or 25 March 2017.

NAB was heavily criticised during the banking royal commission for repeated breaches of super laws, with commissioner Kenneth Hayne referring its conduct in relation to the transfer to MySuper to APRA for consideration of possible criminal or civil proceedings.

Commissioner Hayne singled out NAB in the final banking royal commission report released in February 2019, stating he was not confident the bank had learnt lessons of the past after having heard former CEO Andrew Thorburn and former chair Ken Henry on the stand.

“I thought it telling that Mr Thorburn treated all issues of fees for no service as nothing more than carelessness combined with system deficiencies when the total amount to be repaid by NAB and NULIS on this account is likely to be more than $100 million,” commissioner Hayne stated in the final report.

Both Mr Thorburn and Mr Henry subsequently stepped down from their respective roles shortly after the release of the report.

As at 30 June 2018, NAB reported a payout estimate of $6.7 million for fees-for-no-service breaches, but later provisioned an additional $65 million.

However, the bank’s group-wide remediation bill was substantially larger, with ASIC revealing NULIS was paying more than $102.9 million in compensation to super customers who were wrongly charged for general advice, as highlighted in the fifth round of the royal commission hearings.

In November 2019, NAB agreed to pay $49.5 million to settle a class action brought against it by Slater and Gordon in September 2018 in relation to consumer credit insurance.

In August last year, 400,000 NAB customers were advised they may be eligible to a join a class action against the major bank for alleged mis-selling of personal loan and credit card insurance to NAB and MLC customers.

Slater and Gordon claimed the insurance was “of little or no value” to customers who would “never have been eligible to claim against”.  

In its full-year results for the 2019 financial year, NAB reported a statutory net profit after tax of $4.8 billion, down from $5.5 billion in FY18.

A 4.2 per cent decline in NAB’s net operating income ($17.2 billion) was exacerbated by a 0.4 per cent increase in operating expenses ($8.1 billion) and customer-related remediation costs totalling $364 million.  

In October last year, NAB revealed it will absorb a further $1.18 billion after tax in customer remediation and software and expected that this would erode its cash earnings for the second half of the year by $1.12 billion.

In April 2019, it revealed that its earnings would take a hit by an additional $522 million in customer remediation costs, with the additional charges bringing total provisions for customer-related remediation as at 31 March 2019 to $1.1 billion, when combined with provisions raise in the second half of 2018, which had not yet been utilised.

 [Related: NAB flags AUSTRAC breaches to shareholders]