Millions of Australians could get thousands of dollars back from the banks in what’s set to be the largest class action in the nation’s history.
Law firm Slater and Gordon announced on Tuesday it would launch a class action against the banks, alleging some big bank-backed super funds have ripped off millions of members.
It is estimated that the lawsuits could get some account holders up to $3000 back and cost the banks up to $1 billion.
Two Australian financial services giants, the Commonwealth Bank’s Colonial First State and AMP Super will be the first targets of the record class action following evidence given in the royal commission.
”Slater and Gordon will take on the banks on behalf of millions of Australians whose retirement savings may have been gouged by bank-owned super funds lining their pockets,” the firm said in a statement this morning.
Slater and Gordon set up a website to garner expressions of interest for its Get Your Super Back campaign, warning up to one in three Australians could have already paid the price for super funds’ failures.
“What funds like Colonial First State have been doing is dumping super with a parent bank such as CBA,” the firm said on the website.
“The interest from the parent bank is so low that some investors in the cash option are receiving returns as low as 1.25 per cent a year – which is even below the RBA cash rate.
“This rate is ludicrously low. Standard bank interest should be around 2.0 to 2.5 per cent. That’s what most banks offer to ordinary customers with their normal term-deposits.”
Slater and Gordon will allege bank funds charged exorbitant fees and failed to achieve competitive cash interest rates on cash option funds.
“The allegations arise from evidence to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry,” the firm added.
The royal commission heard in August that AMP Superannuation delivered net investment earnings of $3.23 for one member in their late 60s who was wholly invested in cash; a net investment rate of return of 0.02 per cent. This member was also paying a monthly adviser service fee.
Commissioner Kenneth Hayne also heard how thousands of Colonial First State customers were overcharged fees after being left in higher-cost funds. This was despite a legal requirement for these members to be shifted into lower-cost, MySuper funds.
The royal commission heard the failed super switch affected 15,000 customers, with counsel assisting Michael Hodge referring to the failure as an “offence”. However, Colonial First State executive, Linda Elkins described it as an “error”.
Another financial behemoth, NAB, yesterday elected to keep its standard variable rates on hold in a bid to retain customer trust, following similar admissions of weakness in its superannuation business.
AMP and the Commonwealth Bank have both responded to Slater and Gordon’s move.
AMP said it is committed to acting in its members’ best interests and asked those with concerns to contact AMP directly.
“While we have not been served with any proceedings at this stage, we understand the proposed Slater & Gordon class action may be related to issues in our superannuation business that we previously identified and reported to the regulator. As we set out in our submissions to the royal commission, we are already fixing these issues and remediating customers,” the company’s statement said.
“We have reduced the administration fees on some of our cash investment options to address the issue of negative returns in the small number of funds impacted by this issue. We are also compensating affected customers for lost earnings.”
It also noted around 700,000 customers will benefit from discounted fees on its MySuper products, as announced in July.
The Commonwealth Bank’s short statement acknowledged Slater and Gordon’s announcement, and emphasised the bank has not been served with any legal proceedings.