Westpac penalised $20 million for incorrectly charging commissions for insurance

The Australian Federal Court has ordered lender Westpac Banking Corp’s superannuation agent (BT Funds) to pay A$20 million for incorrectly charging commissions for insurance in superannuation.

The Federal Court has ordered the fine after Westpac opted to settle the matter, which was one of six court cases launched against the bank by the corporate watchdog in November.

BT Funds, the court said, had continued to charge these commissions until 2020. BT Funds was found to be wrongly charging commissions to more than 9,900 superannuation customers.

The Court found BT Funds had charged superannuation members insurance premiums that included commission payments, despite the banning of these commissions under the Future of Financial Advice reforms in 2013. 

Asgard Independence Plan Division Two (Asgard Fund) members were also charged commissions via their premiums that were being paid to financial advisers, even though the members had chosen to have the financial adviser component removed from their account.

ASIC Deputy Chair Sarah Court said ‘Over 9,000 Asgard Fund members were incorrectly charged commission payments totalling more than $9 million. This misconduct was caused by the failure to implement proper systems to ensure consumers are correctly charged.’

The ‘insurance in super’ matter was one of six civil penalty proceedings ASIC filed against Westpac in November 2021 (21-320MR). This is the first matter to receive judgment recently.

‘As the Court finalises these matters against Westpac, we urge Westpac, and other financial institutions, to look at their culture of compliance and invest in systems that mean incorrect charging of fees, premiums and commissions does not occur,’ said Ms Court.

The Court also found BT Funds misrepresented to members in their quarterly statements that proper deductions had been made, even though commissions were not permitted.

Westpac has indicated it will pay over $9.8 million in remediation to over 9,900 members by July 2022.

The Australian four big banks and financial institutions have been under scrutiny by the Royal Commission who since 2018 have found widespread shortcomings, and customers being misled by the big banks.

Australians who have paid for unnecessary add-on insurances or fees for no service are now clawing back hundreds of millions in cash from the big banks and the finance sector through private services like Claimo, and ASIC remediation programs and class actions. You can read more about add-on insurance class actions here