Commonwealth Bank (ASX:CBA) sued over 'misleading' conduct

Big bank in hot water for allegedly slugging customers $55 million in fees that they should not have been charged.

| More on:
A man holds a law book and points his finger, indicating an accusation or alleged offence to be settled in court

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The corporate watchdog has started legal action against the Commonwealth Bank of Australia (ASX: CBA), accusing it of misleading or deceptive conduct.

The Australian Securities and Investment Commission (ASIC) will also allege that the bank has violated its Australian financial services licence requirements.

The accusations revolve around almost $55 million in fees charged to more than 800,000 accounts, affecting almost a million customers.

ASIC will allege in the Federal Court that Commonwealth Bank incorrectly charged monthly fees to customers who were actually entitled to have it waived. The waiver criteria were stated in their contracts with the bank.

This allegedly occurred over more than 9 years between June 2010 and September 2019.

The corporate regulator will attribute the erroneous charges to 30 instances of "inadequate or improperly configured" systems, plus manual mistakes by bank staff.

Commonwealth Bank acknowledged the court case in a statement to the ASX on Thursday morning.

"CBA has cooperated fully with ASIC during its investigation, however it does not accept the way that the alleged contraventions have been formulated in the proceedings and therefore will defend the matter."

ASIC has a problem with not just the fees

As well as the actual erroneous fees, ASIC accuses the bank of making "false or misleading" representations to customers that the charges were legitimate. 

CBA is also accused of "misleading or deceptive conduct" for telling newly contracted customers that adequate systems were in place to calculate waivers.

ASIC alleges CBA's failure to investigate the "multiple systemic issues" amounts to a breach of its obligations to "provide financial services efficiently, honestly and fairly".

The bank apologised to impacted customers in its statement.

"Remediation payments of $64.2m (including interest) have been sent to customers. Of the total remediation payments, approximately 90% related to two fee waiver issues that were identified in 2017 and 2019," the company stated.

"The remediation of customers affected by the issues in these proceedings has been completed. CBA continues to invest in strengthening its systems and procedures."

The court can legally only penalise for violations between April 2015 and September 2019, which equate to 2.4 million monthly charges totalling $11.5 million.

"ASIC commenced this proceeding because financial institutions need to have robust compliance systems to meet their obligations to customers," stated the watchdog.

"Financial institutions need to put customers first, and customers should have confidence that the banks they deal with charge fees correctly."

A date for the hearing has not yet been set.

At the time of writing, the CBA share price is trading flat at $86.02, down just 0.09%

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

A young woman smiles as she rides a zip line high above the trees.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a bountiful session for investors this hump day.

Read more »

An excited man stretches his arms out above his head as he reaches a mountain peak.
Record Highs

Breaking: CBA shares hit a new record of $180

CBA shares can't possibly keep rising can they?

Read more »

A happy young couple celebrate a win by jumping high above their new sofa.
52-Week Highs

Guess which ASX 200 furniture retailer is up 400% in 5 years?

Up 400% over the past five years is not bad for a furniture retailer. Here's why this quiet compounder has…

Read more »

Arrows pointing upwards with a man pointing his finger at one.
Share Market News

Morgans says these ASX stocks can rise 30% to 80%

These shares could be cheap according to the broker. Let's see what it is saying.

Read more »

Two people shaking hands in the boardroom on a merger.
Mergers & Acquisitions

What did Macquarie make of the Brickworks and Soul Patts merger?

Macquarie sees simplification, scale, and upside… but it also has a warning..

Read more »

A cool young man walking in a laneway holding a takeaway coffee in one hand and his phone in the other reacts with surprise as he reads the latest news on his mobile phone
Mergers & Acquisitions

PointsBet share price surges 11% on improved takeover offer

The bidding war for PointsBet shares continues apace today.

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Broker Notes

Leading broker tips 50%+ upside for IDP Education shares

The team at Macquarie thinks this beaten down stock could be a buy.

Read more »

Man looking happy and excited as he looks at his mobile phone.
Share Gainers

Why Coronado, DroneShield, Lovisa, and Mayne Pharma shares are racing higher today

These shares are having a good time on hump day. But why?

Read more »