It seems some banks have decided to jump before they are pushed in regard to some aspects of the Royal Commission inquiry. One of the most damning things revealed last year was that some banks were charging customers for a service that they were not actually receiving, a move that caused widespread public outrage.
Some issues really seemed to elicit public anger more than others, and the idea of being charged banking fees for a service never actually handed out appeared to be one of those.
Commonwealth Bank of Australia (CBA) was one of those banks, and they confirmed on Friday that they are looking to get slightly ahead of the trend and begin to cull these fees before they are officially ordered by either regulators or the government.
In a statement, the bank said its financial planning side of the business had already brought it to a halt, although this only applies to new customers as they launched the measure last Friday. Existing customers are expected to face longer for this to be resolved, and with the further threat by the commission that customers could be set to gain some form of compensation, CBA may try and bring this through quickly.
To that end, CBA confirmed that by the start of April they are planning “to have completed the stopping of charging ongoing service fees for the vast majority of customers”. However, this did not take in all customers, and there was no prediction of when this was likely to happen.
CBA, like all of the other major lenders, have seen their profits hit hard in the last year or so as Royal Commission revelations knock investor and shareholder confidence, and the banks found themselves struggling to retain profits. CBA has already said this change in policy will see their pre-tax profits stripped by another $40m.
Their head of retail banking services, Angus Sullivan, said they were “moving to a new financial advice fee model where customers will pay for banking services when they are delivered”, as it was revealed “the details of this model are currently being worked through”.
However, the timing of this by the bank may not be enough to prevent the book being thrown at them, as the Australian Securities and Investments Commission (ASIC) moots further action, given that CBA has now broken what they say is a court-mandated backing to have stopped it earlier.
Their Commonwealth Financial Planning (CFP) arm has also been prohibited from taking on new customers, and further risked the wrath of the regulators by missing a deadline to submit a report for how they were going to deal with their problem. Instead, a different paper was released by EY, the accounting firm, stating how they were having issues with compliance.
Such behavior is unlikely to bode well with the regulators and legislators, and the largest bank in Australia may well face challenging times ahead to try and reform problematic culture from the inside.
One of the underlying problems is the reliance on having to spot any issues manually, with a lack of automatic response meaning they are operating with aspects that “have a higher inherent risk of failure due to human error or being overridden”.
ASIC have since said that on the basis of the EY report, what CBA has listed as part of its policy to change behavior is not going to be “acceptable”.