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CBA's glacial compensation scheme

If there is one word to describe the pace of Commonwealth Bank's compensation scheme, it is glacial.

The Open Advice Review program (OARP), launched in July 2014 in response to calls for a royal commission into the bank's scandal-ridden financial planning arm, has so far paid 19 to 21 victims a total of $488,815, or an average $21,376 each.

Merilyn Swan's father Merv Blanch turns 90 in November and is still waiting for proper compensation after investing $260,000 with CBA planner Don Nguyen, who lost their life savings.

The bank's initial offer of compensation to the Blanches was $6777 but as the weight of evidence of fraudulent activity became too compelling, they were forced to bump it up to $95,000.

The Blanches and Swan didn't go after the remaining losses because of the time, stress and strain of fighting the bank.

When CBA boss Ian Narev launched the new compensation scheme, the OARP, more than 14 months ago, they decided to reapply.

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They are still waiting.

"CBA have more than 600 people working on this review. They must be the least productive employees in Australia," she says.

"I suspect this is literally an opportunity for CBA to sit back and wait for their problems to be buried. Dad is 90 in November and he has every intention of waiting CBA out."

There have been more than 23,269 expressions of interest and 8835 victims followed through with formal complaints. Of those, 1285 have progressed to assessment stage and 686 complaints had been finalised with a total offer of just under $1 million.

Process will take up 2016

Narev told a Senate hearing in April he expected it would take most of next year to get through the bulk of assessments. If we extrapolate the progress made so far it will be years before all 8000-plus client files are reviewed.

The speed and small amount of compensation paid to so few came as a shock to Senator John Williams, who triggered a Senate inquiry into the bank after whistleblower Jeff Morris gave evidence of forgery and fraud in the financial planning arm and a cover-up of management, including "sanitisation" and "shredding" of files, and low-ball compensation offers to victims.

Dad is 90 in November and he has every intention of waiting CBA out.

Merilyn Swan

Morris exposed misconduct of "dodgy" Don Nguyen, who was banned by the corporate regulator for seven years. He had more than 900 customers.

In its first highly criticised compensation scheme, the bank paid out $23 million to 202 clients of Nguyen. The question is, what happened to all the others?

Senator Williams said given the number of Nguyen's clients alone, there should be more payouts.

"Given Nguyen had hundreds of clients and planners like Ricky Gillespie, who got banned for forgery and fraud, and other planners such as Rollo Sherriff, surely given all this bad advice, there should be more money paid out by now?"

He is right. Going by the numbers in the latest report, only 8 per cent are being offered compensation and of those, 2 per cent are being offered a refund only on fees.

John Berrill, principal of Berrill Legal and former head of Maurice Blackburn's CBA unit, says "consumers want this to be a model for compensation schemes in financial services but it offers a less-than-glorious start with the time it is taking and the paltry success rate of the applications so far".

Bank needs to speed up

The bank can rattle off a list of reasons why the compensation scheme is taking so long, including that it needed time to put the architecture together, which has a lot of layers, but if it doesn't pick up speed soon the whole process will blow up in its face and end up looking like a whitewash.

At the very least it speaks volumes about the systems the bank has, and the quality process and review that was taking place. It speaks to a very deep flaw in their systems that things were not electronic/digitally based.

The way it looks right now, the only winners from the compensation scheme are the law firms the bank has brought into its circle and the various advisory groups, all of which stand to make millions of dollars out of it.

Senator Williams said the bank should have listened to him when he advised it to get whistleblower Jeff Morris to be part of the compensation scheme process.

It should have gone further and allowed customers to pick who represents them.

Better representation would help

Financial Resolutions Australia, which successfully represented several CBA customers, including Jan Braund, is one such group left out in the cold.

FRA's Stephen Baume says with an average 1.383 assessments a person over four months, not being able to match statements of advice to investments made is a concern.

"As we found in Don Nguyen, there can be a whole range of reasons for investments not matching," he said. "As the large public company audit failures demonstrate, that if you follow a flawed audit program you get a flawed result," he says.

In Morris' case, CBA rejected his offer to help. Interestingly, National Australia Bank has paid out $1.3 million in compensation to 62 customers since launching its own compensation scheme in February.

NAB's scheme lacks transparency and has its own faults, but it allows the victims to choose their representatives, unlike CBA, which dictates the representatives a victim can use.

It means Morris was able to act as a customer advocate for some NAB victims. He said the customers he has represented have received fair compensation with a minimum of fuss and delay. "The numbers bear this out ... It might be time for the Senate to have another look at how CBA is doing over these victims all over again," he said.

A Fairfax Media investigation into the CBA scandal revealed that the culture inside the division was one of "high-octane" sales, with profit at any cost the mantra.

It was even worse in its other division, Financial Wisdom. Indeed, a former compliance manager said compliance was treated with contempt and nicknamed the "business prevention unit".

It is horrifying and it resulted in thousands of customers financially devastated. The OARP is a reminder of what went wrong and what needs to be fixed.

It should also give ASIC a nudge to think about its role in the process. Does ASIC think the pace is acceptable? Will there be consequences to advisers in CBA and management for findings of poor advice and/or processes that the bank acknowledges leads to loss and remediation? They are answers we have been waiting years to hear.