February 4, 2019
SYDNEY (Reuters) – Commonwealth Bank of Australia’s financial planning unit is stopping levying service fees continuously to its customers and will only charge fees when the services are delivered, following an order from the corporate watchdog.
Commonwealth Financial Planning Ltd (CFPL) has started the process to stop levying such service fees to existing customers from Feb. 1, Australia’s top lender said in a statement on Monday.
Earlier in the day, The Australian Securities and Investment Commission (ASIC), in a separate statement, told CFPL to stop taking fees because it has failed to comply with a court order to fix wrongly levied fees.
The lender said that CFPL has also agreed not to enter into any new service arrangements with customers.
CBA expects the changes to have an impact of A$40 million on CFPL’s pre-tax profit.
“CFP will be moving to a new financial advice fee model where customers will pay for advice services when they are delivered,” Commonwealth Bank Group Executive for Retail Banking Services, Angus Sullivan, said.
The orders come as the final report is released by a powerful inquiry that exposed last year systemic wrongdoing across Australia’s financial sector.
Commonwealth Bank, which came under fire at the inquiry over its fee structure and for charging customers fees for financial advice they never received, is seen as particularly exposed to a regulatory crackdown owing to the size of its retail business.
ASIC said the bank’s financial planning arm failed to respond adequately to its concerns about its fees for no service, triggering the restrictions.
The bank had no immediate comment when contacted by Reuters.
The “Big Four” banks – CBA, Westpac Banking Corp, Australia and New Zealand Banking Group and National Australia Bank – plus AMP have already committed to pay more than A$2 billion ($1.45 billion) to wronged customers.
The new requirements would continue until CFPL is able to satisfy ASIC that all the outstanding issues have been remedied.
“ASIC has also been informed by CFPL that it is now in the process of transitioning its ongoing service model to one whereby customers are only charged fees after the relevant services have been provided,” the statement said. “ASIC will monitor CFPL’s transition to the new model.”
Shares in CBA closed 0.8 percent higher, while the broader market firmed 0.5 percent.
(Reporting by Wayne Cole and Tom Westbrook; Additional Reporting by Aditya Soni in Bengaluru; Editing by Peter Cooney and Muralikumar Anantharaman)