NAB broke the law 10,000 times over the course of five years, charging customers fees-for-no-service, the regulator ASIC alleged on Tuesday.
ASIC has damned the bank for its "systematic failures" which allowed the contraventions to occur, which carry a potential maximum penalty of $10 billion.
The allegations have emerged as newly appointed CEO Ross McEwan and chairman Philip Chronican address shareholders at the bank's AGM.
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In what appears to be a frantic race to the bottom among Australian banks at the moment, NAB has played its latest hand.
On Tuesday, ASIC alleged NAB broke the law 10,000 times over five years, owing in part to its ongoing fee-for-no-service furore.
"This widespread misconduct was examined in some detail by the Financial Services Royal Commission. ASIC views these instances of misconduct as systematic failures, unfair to customers including those that are more vulnerable," ASIC deputy chair Daniel Crennan.
ASIC alleges the bank charged fees for services it knew it had not provided, and failed to issue or issued faulty disclosure statements that concealed the practice. By extension, ASIC argues the bank's systems were clearly faulty for not picking up the widespread error, and in doing so, it contravened its obligation to act honestly and fairly.
"When the Fees for No Service misconduct is coupled with Fees Disclosure Statements inadequacies or failings, customers are potentially placed in a more disadvantageous position. The customer may not therefore have been provided with the opportunity to know whether they have received the services for which they have paid or the amount of fees charged to them," Crennan said.
All in all, the contraventions carry a theoretical maximum penalty of nearly $10 billion. Of course, history would indicate any fine NAB does eventually pay will come in far lower. By way of comparison, if Westpac were prosecuted even at the lower penalty limit for each of its 23 million contraventions in the current Austrac investigation – a highly improbable scenario – its bill would reach $391 trillion.
For the record, the largest corporate fine paid in Australian history was $700 million by the Commonwealth Bank – 0.07% of the theoretical $1 trillion maximum it could have copped.
Regardless, the regulator's disclosure is yet another blow in what appears an almost endless barrage of bad PR for the country's big banks. Not least because newly-appointed CEO Ross McEwan and chairman Philip Chronican will face their first NAB AGM on Wednesday, with this news fresh in the minds of shareholders.
"We take this action seriously and will continue to work cooperatively with ASIC to deal with this issue," McEwan said in his opening address on Wednesday.
McEwan and Chronican are of course the replacements for the last two – CEO Andrew Thorburn and chairman Ken Henry – who were shown the door after royal commissioner Kenneth Hayne singled them out as the only executives named in his final report. Before his departure, Thorburn blamed "process errors" for the bank's dishonesty. In a written submission to the royal commission in 2018, NAB also rejected the suggestion the scandal was criminal.
Chronicano acknowledged this "very challenging 12 months" in his address to shareholders.
"The Royal Commission demonstrated the gap between how we have been operating and how our customers, shareholders and the community expect us to operate," he said.
"NAB has lost a lot of trust and significant changes need to be made... we are determined not to let you down again."
With 12 months to go before the next AGM, there'll be plenty of opportunities to disappoint again.