The National Australia Bank held off revealing the full extent of its superannuation issues to a regulator as it tried to avoid being labelled the “worst of a bad bunch” charging fees for no service, an inquiry has heard.
The revelations in the banking royal commission came as the Australian Securities and Investments Commission estimated compensation for fees-for-no-service across the financial services industry could exceed $850 million.
The inquiry heard NAB spent months trying to find ways to justify not paying full compensation to super members wrongly charged an advice fee, although the bank denies that was what it was trying to do.
NAB was still dealing with the plan service fee issue affecting some superannuation customers in October 2016 when ASIC was set to release its industry report on fees for no service.
The inquiry heard ASIC’s draft report, given to the bank for fact checking, had NAB “in the middle of the pack” when it came to compensation, with an estimated $16.2 million total exposure.
ASIC had been told about three issues with plan service fees for super members, but only knew about the customer impact for one of them that involved $100,000 compensation for about 100,000 customers.
At that time NAB knew it would have to pay about $34 million to compensate 220,000 super customers with the issue about to go before trustee boards, documents before the royal commission show.
A communications strategy recommended disclosing the total remediation amount, but noted: “We risk being labelled as the worst of a bad bunch amongst the ongoing advice service fees report.”
NAB executive Paul Carter said the relevant boards at the time of the feedback to ASIC still had to decide the remediation approach.
He said the bank wanted to be transparent, so its consumer and wealth chief customer officer Andrew Hagger contacted ASIC.
Senior counsel assisting the commission Michael Hodge QC suggested being fully transparent with ASIC might mean saying the bank expected within two days to fully approve an additional $30 million in compensation, something already recommended by management.
Mr Carter, who previously headed up NAB’s wealth products, said that was broadly the intent of Mr Hagger’s proactive contact with the ASIC commissioner.
Mr Carter denied the bank tried to find ways to avoid having to refund all the money to superannuation customers for the plan service fee that was charged despite no adviser being linked to some MLC super accounts.
Internal bank documents show there was discussion in 2016 about whether it was possible to say other services were provided by MLC to members without a linked adviser, to justify keeping the money.
Mr Hodge said: “Can I put this to you very bluntly: What you did was to systematically look for any way to avoid having to refund all of the money to customers.”
Mr Carter disagreed.
Mr Hodge said: “And that is why there is this idea that somehow you will find some other service that can be said to have been provided in exchange for the money.”
Mr Carter again disagreed.
NAB is dumping the plan service fee and paying $87 million in refunds and other compensation to 205,000 current Masterkey personal super members.