Australia’s major banks will make changes to its Banking Code of Practice in order to stamp out the practice of charging fees to dead customers.
The Australian Banking Association (ABA), which represents 24 major banking and financial services institutions including the Big Four, said that banks would “proactively” act to discontinue charging fees once notified of a customer’s death and refund any fees charged.
The Australian banking and financial services industry continues to reel from explosive revelations aired in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which has found the massive finance giants acted out of greed and short-term profit.
One among the many ugly truths revealed by the major inquiry was that CBA, NAB and AMP had charged client service, advice or insurance fees to deceased customers.
ABA CEO Anna Bligh said that the issue had been “raised” in the royal commission and “identified as unacceptable”.
“When someone loses a loved one, they need support and compassion as they finalise their loved one’s financial affairs,” she said.
“Charging ongoing advice fees to dead people is clearly unacceptable.”
The association also announced that banks will be changing the way they “manage ongoing financial advice” and only charge for services that are provided.
Bligh stated that this practice “has always been unacceptable”.
“This announcement will put beyond the shadow of a doubt that this practice has no place in Australia’s banking industry.”
“Banks will change the way they manage a customer’s account, proactively contacting them to confirm what services are required for their investments and only charging for those provided.”
Additionally, the ABA have also said it will push for legislation to ban grandfathered commissions relating to financial advice.
“This is another important piece in the puzzle of ensuring there are no conflicts for advisers,” Bligh said.
ANZ and Westpac both announced recently that their profits will take a $431 million and $235 million hit respectively due to customer remediation costs.
CBA announces its own measures
On Tuesday, the Commonwealth Bank of Australia separately announced a suite of measures aimed at remediating inappropriately charged customers.
The changes include:
Reviewing and refunding any unauthorised fees charged to deceased customers
Getting rid of “legacy fees” on certain wealth products from January 2019, set to save customers $25 million a year
Rebating all grandfathered commissions to customers of Commonwealth Financial Planning (CFP) from January 2019, set to save 50,000 customer accounts $20 million a year
Giving CFP customers the option to renew their service arrangements every two years
CBA Wealth Management chief operating officer Michael Venter said the big bank was undertaking a “broader review”, going back seven years, to make sure customers wrongly charged for fees are refunded with interest.
NAB to “redesign processes”
A NAB spokesperson acknowledged to Yahoo Finance that it had charged fees to deceased customers because of “poor operational design”.
“NAB has since re-designed its processes to ensure advice service fee deductions from superannuation and investment accounts cease upon notification of death.
“A remediation program is being developed and is targeted for completion in March 2019,” the spokesperson said.