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Slick and the dead: Westpac sold $10m of financial advice to deceased customers

Business

Westpac has been hit with legal claims and widespread compliance breaches that hurt thousands of its customers over a period of years.

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The finance industry watchdog, the Australian Securities and Investments Commission, has started six civil penalty proceedings against Westpac in the Federal Court claiming penalties of more than $100 million would be appropriate.

ASIC and Westpac will submit to the court that combined penalties of more than $100 million were appropriate.

Among the claims were that over a 10-year period, Westpac and related entities charged more than $10 million in advice fees to over 11,000 deceased customers for financial advice services that were not provided due to their death.

Westpac has already admitted to the allegations in each of the proceedings and will remediate approximately $80 million to customers.

The cases are related to the Westpac’s banking, superannuation and wealth management brands as well as Westpac’s former general insurance business.

ASIC deputy chair Sarah Court said “the conduct and breaches alleged in these proceedings caused widespread consumer harm and ranged across Westpac’s everyday banking, financial advice, superannuation and insurance businesses.

“A common aspect across these matters has been poor systems, poor processes and poor governance, which is suggestive of an overall poor compliance culture within Westpac at the relevant time. 

“Customers are entitled to have trust and confidence in Westpac being able to deliver what it promises, without suffering financial harm. Westpac must urgently improve its systems and culture to ensure these systemic failures do not continue.

“It is unprecedented for ASIC to file multiple proceedings against the same respondent at the same time.

“However, these were exceptional circumstances. ASIC had numerous Westpac-related matters under investigation through the course of 2021, and we decided to expedite those matters for consideration by the court at the earliest opportunity.’’

In other claims, ASIC alleges Westpac distributed duplicate insurance policies to more than 7000 customers for the same property at the same time, causing customers to pay for two (or more) insurance policies where they had no need for the additional policies. 

ASIC also alleges that Westpac issued insurance policies to, and sought payment of premiums from, 329 customers who had not consented to entering into an insurance policy.

ASIC claims that Westpac subsidiary BT Funds Management charged members insurance premiums that included commission payments, despite commissions having been banned under the Future of Financial Advice reforms. 

“Some members also paid commissions to financial advisers via their premiums even though they had elected to have the financial adviser component removed from their account. BT Funds is remediating over $12 million to over 8,000 affected members who were incorrectly charged,’’ ASIC said.

It has also been claimed Westpac licensees BT Financial Advice, Securitor and Magnitude (all no longer operating) charged ongoing contribution fees for financial advice to customers without proper disclosure. Some fees were not disclosed to the customer at all, at other times the amount disclosed was less than the amount charged. It is estimated that at least 25,000 customers were charged more than $7 millon in fees that had not been disclosed, or adequately disclosed.

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