ASIC brought a proceeding against the Commonwealth Bank of Australia (CBA), alleging CBA violated the ASIC Act and Corporations Act by erroneously charging monthly account fees to customers in circumstances where the fee should have been waived. ASIC asserted CBA did not have adequate systems and processes. The court dismissed the proceeding and rejected ASIC’s argument that systems and processes need to have a zero percent mistake or failure rate to be adequate. Partner Selina Nutley explains the key points and what you need to know now.
Between between 1 June 2010 and 11 September 2019 CBA erroneously charged a monthly account fee to almost one million CBA bank account holders who were entitled to a fee waiver. In total, CBA incorrectly charged more than $55 million. As of September 2021, CBA had paid around $64 million in remediation to affected account holders.
In 2021, ASIC commenced proceedings against CBA, alleging, amongst other things, CBA—
The court rejected this argument. Justice Downes said the financial services laws require a high standard of commercial morality and ethics, however “if the legislature had required perfection from licensees, the legislation would have stated this”.
While the court did not provide a test for what would constitute adequate processes and systems, it did detail various factors it considered showed CBA had adequate systems and processes:
ASIC contended each time CBA entered into a contract with a customer which included a fee waiver as a term, CBA made the implied representation it would have ‘adequate’ systems and processes to ensure the fee was waived without fail.
The court did not accept such an implied representation was made. However, it went on to say even if it was, CBA’s customers would not have been misled or deceived because they would know systems and processes within large organisations are complicated and cannot be expected to be perfect.
In summary, systems and processes cannot be viewed as a ‘set and forget’ exercise. Happily, the court found licensees do not need to be perfect, but proactivity in improving systems and processes may be all important. And, as always in a post-Hayne world, if licensees catch wind of an error, they need to act quickly to investigate, resolve, and remediate those affected.