The Commonwealth Bank continued charging fees to dead superannuation customers for nearly three years before finally deciding it was wrong.
CBA investment and superannuation subsidiary Avanteos knew it was charging dead customers in 2015 but only recently stopped the practice, following revelations some advisers had also charged fees to deceased clients’ estates.
“On this review, the conclusion we made was that the practice should cease and should never have occurred,” CBA executive Linda Elkins told the banking royal commission on Wednesday.
Avanteos discovered in 2015 it had continued to charge adviser service fees on accounts after being told the customer had died.
The inquiry heard the view in 2015 and 2016 was not that the practice should not be done but that it needed to be disclosed to members.
Ms Elkins, the executive general manager of CBA’s wealth management arm Colonial First State, said it should have stopped in 2015.
It is the second case of CBA – already dubbed “the gold medallist” for charging fees for no service – taking adviser service fees from the accounts of dead customers
The royal commission in April heard some advisers at CBA subsidiary Count Financial continued charging fees to clients’ accounts after they died, in one case for more than a decade.
CBA has since reviewed all deceased estates, finding the Avanteos problem involving an unspecified number of dead customers.
The bank said it was wrong to treat the problem as a disclosure issue in 2015 and the practice should have been stopped immediately.
It will refund fees incorrectly deducted by Avanteos from deceased estate superannuation, pension and investment accounts and pay compensation for interest or lost earnings.
“While there are circumstances in which deceased estates will require financial advice, these mistakes are unacceptable,” a CBA statement said.
National Australia Bank charged more than 4100 dead super members $3 million in adviser service fees after the trustee knew they had died, with the money taken for a period or until the benefit was paid out.
The royal commission on Wednesday heard CBA and its now-CEO Matt Comyn tried to convince the regulator to issue a media release rather than take stronger action over the sale of superannuation products in bank branches.
The Australian Securities and Investments Commission had raised the possibility of court action before proposing an enforceable undertaking.
CBA’s approach was to have Mr Comyn, then its retail bank head, call ASIC deputy chair Peter Kell.
Senior counsel assisting the commission Michael Hodge QC suggested the strategy was to get ASIC’s deputy chair to “override” the undertaking.
Ms Elkins did not think that was what was happening.
She said it was important to meet Mr Kell to raise concerns about the industry’s need for clarity about the definitions of general advice versus personal advice.
CBA and ANZ last month entered into enforceable undertakings and agreed to change the way they distribute super products to customers.