'Eroding consumer trust': ASIC takes NAB to court over fees for no service
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'Eroding consumer trust': ASIC takes NAB to court over fees for no service

National Australia Bank has been accused of misleading customers and breaching financial services laws, in a new lawsuit from the corporate watchdog that alleges it charged hundreds of thousands of superannuation members about $100 million for services that were not provided.

In a fresh blow to the bank after its gruelling appearance at the royal commission last month, the Australian Securities and Investments Commission (ASIC) on Thursday launched the action against two NAB-owned trustees, which are meant to look after super fund members' interests.

The case is ASIC's first action over an industry-wide scandal known as "fee for no service" that has cost consumers about $1 billion. The watchdog is expected to take further action against other major financial institutions over the issue.

ASIC's action focuses on fees taken out of members' accounts by two NAB trustees - Nulis Nominees and MLC Nominees - between 2012 and 2017, for financial advice that was never provided.

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About $33 million in fees was drained from 220,000 members of MLC MasterKey Business and MLC MasterKey Personal Super who did not have an adviser, ASIC said.

A further $67 million in fees were deducted from about 300,000 members of MLC MasterKey Personal Super where advisers were not required to provide services.

ASIC is seeking a civil penalty and a Federal Court declaration that NAB contravened various financial services laws.

It claims the trustees breached the Corporations Act by deducting the fees, and broke the ASIC Act by making "false or misleading" representations to their customers.

It also claims the bank's wealth companies breached general law duties and the Superannuation Industry (Supervision) Act requirements of trustees, including the responsibility to act in customers' best interests.

The claim notes that the companies had already agreed to pay compensation and that was likely to stretch to about $87 million. But the regulator argues in the court documents that the compensation did not make court action unnecessary.

"Irrespective of the remediation, the conduct of the trustees did not promote confident and informed decision making by retail clients," ASIC said.

"Further, it promoted inefficiencies in the operation of Australia's regulated and taxpayer-supported superannuation arrangements, thereby exposing the wider Australian public to financial detriment as well as eroding consumer trust and confidence in the efficient administration of superannuation funds to the detriment of the wider industry."

NAB's chief legal and commercial counsel, Sharon Cook, said the bank was assessing the details of the case, and it expected to have compensated 305,000 members by November.

“We will consider carefully the allegations that have been made,” Ms Cook said in a statement. “We respect the work of our regulators and will work with ASIC on these matters.”

ASIC's allegations centre on a plan service fee paid by MLC MasterKey superannuation customers, which could be as much as 0.44 per cent of the member's account balance. The fee was to cover the cost of an adviser, linked to the member's employer, who would provide group-based advice to the business tailored to those employees.

Those employees had the right to turn off the fee when they changed jobs but MLC never told them they could do so, meaning they continued to be charged even when they were no longer receiving advice. ASIC claims MLC explicitly told some members it was entitled to charge the fee.

NAB's conduct in this area, including delays in compensation paid to customers and its reporting of the breaches fo ASIC, was explored in depth at last month's hearing of the royal commission into financial misconduct.

In its preliminary findings, counsel assisting the commission raised the prospect that the behaviour of Nulis and MLC could have led to criminal action over tardy breach reporting.

NAB earlier this week hit back at those suggestions, claiming it did not owe its customers an "overarching obligation" to act in their interests.

The royal commission's preliminary findings also lashed ASIC for failing to take a tougher line on enforcement.

Counsel assisting the commission said NAB's dealings with ASIC over fees for no service suggested "a lack of respect for the regulator and a lack of authority on the part of ASIC".

Clancy Yeates writes on business specialising in financial services. Clancy is based in our Sydney newsroom.

Mathew Dunckley is business editor for The Sydney Morning Herald and The Age. Based in our Melbourne newsroom, Mathew has almost 20 years as a journalist and editor.

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