16 Jul ASIC irked by banks’ remediation pace
Ronald Mizen – Australian Financial Review – Thursday 16 July 2020
The corporate regulator has vented frustration with banks and wealth managers slow to remediate customers dudded by poor financial advice, as more than 2 million people wait for $3 billion in compensation.
The Australian Securities and Investments Commission chairman also said he was taking extremely seriously a pending decision on whether to appeal the judgment in the Westpac “shiraz and wagyu” responsible lending case.
ASIC chairman James Shipton told the Parliamentary Joint Committee on Corporations and Financial Services on Wednesday he welcomed powers that would allow ASIC to force institutions to compensate consumers.
“We are looking forward to a directions power that, from a regulatory tool perspective, will be very useful in this,” Mr Shipton said.
His comments came just days after The Australian Financial Review revealed the big four banks and AMP had spent up on consultants in their remediation programs to avoid over-compensating affected customers.
An internal briefing paper from ASIC dated November last year accused the banks of taking “a legalistic approach” to reducing the amount of money they would be required to pay customers.
“In doing so, the institutions have demonstrated a willingness to spend large amounts of money on external consultants and management time, rather than comprehensively dealing with the problem,” the briefing paper said.
Mr Shipton told the parliamentary committee that ASIC was having “very robust and forthright conversations” with the banks about accelerating payments.
He said he did not want to see remediation programs “getting tied up in bureaucracy” and being prolonged because of unnecessary reliance on external consultants.
ASIC revealed it is overseeing 89 remediation programs across almost 100 licensees with about $3 billion still to be paid to more than 2 million customers over the next 12-18 months. So far only $828 million has been returned to consumers.
Pressure was also mounting on ASIC to accept the “umpire’s decision” in the Westpac responsible lending case, with the Liberal chairman of the committee, James Paterson, pressing Mr Shipton on the matter.
“Now that you’ve appealed once and been unsuccessful, is it really wise for ASIC to create further uncertainty with another appeal?” Senator Paterson said, reflecting concerns of senior government ministers about the case.
Mr Shipton said he was taking the matter “extremely seriously” but it would be “premature” to comment on any action ASIC “may or may not take”.
“I would be front running any decision of the commission by offering a personal comment,” he said.
Commissioner Danielle Press told the committee AustralianSuper did not breach the Corporations Act when in January it blamed the introduction of a 0.04 cent levy on the government’s “Protecting Your Super” laws.
AustralianSuper said it needed to raise extra revenue to cover the shortfall created by the government’s decision to cap fees on low-balance super accounts at 3 per cent.
Members of the Coalition government were furious with the suggestion, with Superannuation Minister Jane Hume saying the explanation “rang hollow” given the fund’s assets had ballooned by more than 50 per cent in two years.
In March, Mr Shipton described the matter as “very serious” and said AustralianSuper had been asked to provide further information.
The $182 billion fund was later forced to change information supplied to members about the levy that kicked in on April 1. But Ms Press on Wednesday said ASIC did not believe AustralianSuper had broken the law.
“We have and did seek further information from Australian super about the fee increase… we have also obtained legal advice,” Ms Press said.
“The effect of the legal advice is that AustralianSuper has not breached its obligations as defined in the Corporations Act.”
Ms Press also said Industry Super Australia’s bungling of guidance that accessing savings should be a “last resort” for laid-off workers, did not meet the bar required for the regulator to take further action.
“An assumption of a market rate of return can vary dramatically, and I don’t think there is a position for ASIC to say whether an assumption on a return is correct or incorrect,” she said.