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A major bank will refund around 216,000 customers as compensation for failing to apply fee waivers, interest concessions and other benefits since 2008.
CBA will refund customers approximately $80 million after an investigation uncovered a "significant breach" of its discount application process.
An ASIC statement said that the refund payments from CBA include an additional amount of interest to recognise the time elapsed since the relevant benefit was not applied. CBA reported the matter to ASIC under its breach reporting obligations in the Corporations Act.
For an annual fee, the Wealth Package (described as 'Mortgage Advantage Package' for some customers) offered benefits such as interest rate discounts and fee waivers in relation to a range of products including home loans, credit cards, transaction accounts, personal loans, overdrafts and insurance.
CBA relied on staff to manually apply many of the discounts available under the Wealth Package. Investigations revealed that an exception report, which was designed to detect when the discounts were not properly applied, was not working properly.
CBA discovered the breach following a customer complaint and reported it to ASIC in 2014. CBA committed to fully investigate the cause of the breach and the impact on all eligible Wealth Package holders. CBA also engaged Ernst & Young, an independent firm, to review and provide recommendations to improve controls, ensure its remediation process would identify all those affected, and ensure an accurate calculation of refunds.
"This was a significant breach, and shows how important it is for licensees to have robust systems in place to ensure financial products deliver the benefits that consumers have paid for,” ASIC deputy chairman Peter Kell said.
“Manual processes to apply discounts, waivers and other concessions involve inherent compliance risks,” Mr Kell said.
“Licensees should carefully consider whether those risks are being appropriately managed, or are capable of being appropriately managed.”
CBA has simplified the Wealth Package by reducing the number of options and products on offer. These changes have not removed benefits that existing package holders were entitled to receive for existing eligible products.
ASIC acknowledged the cooperative approach taken by CBA to resolve this matter.
In October, CBA began contacting the Wealth Package holders who were affected. ASIC said the majority of affected Wealth Package holders will be contacted before the end of December, and the remainder in early 2016.
A breach occurs when an individual has violated or failed to perform a term as stipulated within a contract.
Mortgages are loans that are used to buy homes and other real estate where the property itself serves as collateral for the loan.
Mortgages are loans that are used to buy homes and other real estates where the property itself serves as collateral for the loan.