Powered by MOMENTUM MEDIA
subscribe to our newsletter

‘Westpac has fallen short’, says CEO

The major bank’s chief has apologised to customers, admitting far-reaching systemic issues led to each of the six matters presented in new civil lawsuits.

ASIC has commenced six civil penalty proceedings against the big four bank in the Federal Court, alleging widespread compliance failures.

The lawsuits are each the result of an individual ASIC investigation, alleging failures across multiple Westpac businesses, with thousands of affected customers, across the group’s banking, superannuation and wealth brands as well as its former general insurance business.

The bank has admitted the allegations in each of the proceedings and will remediate around $80 million to customers, stating the majority have already received their payments.

Westpac chief executive Peter King responded to the matters on Tuesday (30 November) morning.

Advertisement
Advertisement

“We have cooperated with ASIC through the investigations and the process to get to this resolution today,” he said.

“In each of these matters, Westpac has fallen short of our standards and the standards our customers expect of us. The issues raised in these matters should not have occurred and our processes, systems and monitoring should have been better.

“We are putting things right and unreservedly apologise to our customers.”

The six matters filed against Westpac concern:

Debt onsale: ASIC has alleged that Westpac sold consumer credit card and flexi-loan debt to debt purchasers with incorrect interest rates.

PROMOTED CONTENT


The interest rates were higher than Westpac was contractually allowed to charge on at least part of the debts, resulting in more than 16,000 customers, who were likely to be in financial distress, reportedly being overcharged interest.

Westpac and/or the debt purchasers have refunded over $17 million to affected customers.

Deregistered company accounts: ASIC has claimed that Westpac did not have appropriate processes to manage accounts held in the names of deregistered companies.

As a result, Westpac supposedly allowed approximately 21,000 deregistered company accounts to remain open, continuing to charge fees on those accounts and allowed funds to be withdrawn from these accounts that should have been remitted to ASIC or the Commonwealth.

Fees for no service – deceased customers: ASIC alleged that over a 10-year period, Westpac and related entities within the Westpac Group, charged over $10 million in advice fees to more than 11,000 deceased customers for financial advice services that were not provided due to their death.

Inadequate fee disclosure: ASIC has alleged that Westpac advice licensees BT Financial Advice, Securitor and Magnitude (all no longer operating) charged ongoing contribution fees for financial advice to customers without proper disclosure.

Some fees were not disclosed to the customer at all, at other times the amount disclosed was less than the amount charged. It is estimated that at least 25,000 customers were charged over $7 millon in fees that had not been disclosed, or adequately disclosed.

General insurance: ASIC has alleged that Westpac 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 where they had no need for the additional policies.

ASIC also claimed that Westpac issued insurance policies to, and sought payment of premiums from, 329 customers who had not consented to entering into an insurance policy.

Insurance in super: ASIC has claimed that Westpac wealth subsidiary BT Funds Management charged members insurance premiums that included commission payments, despite commissions having been banned under the Future of Financial Advice (FOFA) reforms.

BT Funds Management reportedly represented that the insurance fees had been properly deducted from members accounts when in fact the insurance fees that were deducted included commissions that were not permitted.

Some members also paid commissions to financial advisers via their premiums even though they had elected to have the financial adviser component removed from their account.

BT Funds is remediating over $12 million to over 8,000 affected members who were incorrectly charged.

APRA has also been reviewing the insurance in super matters, taking a coordinated approach with ASIC.

ASIC deputy chair Sarah Court commented the regulator is “disappointed to have to yet again commence legal proceedings” against a major bank.

“It is unprecedented for ASIC to file multiple proceedings against the same respondent at the same time,” she said.

“However, these were 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.”

The bank has admitted the allegations in each of the proceedings and will remediate around $80 million to customers.

The penalties are subject to court approval and have been provisioned, along with anticipated legal costs in the bank’s 2021 full-year results.

Ms Court added that Westpac must “urgently improve its systems and culture to ensure that systemic failures do not continue”.

“A common aspect across these matters has been poor systems, poor processes and poor governance, which is suggestive of an overall poor compliance culture within Westpac at the relevant time,” Ms Court said.

“Customers are entitled to have trust and confidence in Westpac being able to deliver what it promises, without suffering financial harm.”

Last week, Westpac’s New Zealand arm was blasted by the Reserve Bank of New Zealand (RBNZ) and an independent report the central bank had ordered into its governance.

The review had confirmed the RBNZ’s fears around compliance issues, finding there had been historic underinvestment in risk management capabilities at the bank.

In August, RBNZ had also issued a formal warning to Westpac over failure to flag international transactions as required under anti-money laundering and counter-terrorism financing (AML/CTF) laws.

The concerns echoed those in the local Westpac and AUSTRAC scandal, which resulted in the bank copping Australia’s largest corporate penalty of $1.3 billion over 23 million breaches of Australian AML/CTF laws.

[Related: ANZ sued over home loan introducer program]

‘Westpac has fallen short’, says CEO
mortgagebusiness

Grow your business exponentially in 2022!

Discover the right strategies to build a more structured, efficient and profitable businesses at The Adviser’s 2022 Business Accelerator Program.

Visit the website here to secure your ticket.

Sarah Simpkins

Sarah Simpkins is the news editor across Mortgage Business and The Adviser.

Previously, she reported on banking, financial services and wealth management for InvestorDaily and ifa.

You can contact her on This email address is being protected from spambots. You need JavaScript enabled to view it..

Latest News

The September quarter last year recorded the highest level of profitability from home sales in more than a decade, but researchers have warn...

The pandemic has changed what buyers look for in housing, according to new research.   ...

A new partnership exploring how the build-to-rent-to-buy (BtRtB) model could help at-risk and vulnerable women become home owners is under...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

Do you think APRA's bank buffer changes will see more borrowers use non-banks?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.