ASIC v Commonwealth Bank of Australia [2020] FCA 790: Fine For Excessive Fees

Thursday 11 June 2020 @ 10.24 a.m. | Corporate & Regulatory | Legal Research

In ASIC v Commonwealth Bank of Australia [2020] FCA 790 (5 June 2020), the Federal Court of Australia (“Federal Court”) has ruled that Commonwealth Bank of Australia (“CBA”) pay a $5 million fine for charging excessive fees to 8,659 farmers who took part in the bank’s flawed AgriAdvantage Plus Package scheme.


The issue of conduct by banks was raised in the hearing of the Banking Royal Commission which  also covered farming issues. In this case, CBA customers came out behind on 131,542 occasions when they used the bank's AgriAdvantage Plus Package (“AA+ Package”) that was meant to give customers fee waivers, interest rate discounts and bonus interest on savings in exchange for their payment of “package fees”. ASIC launched the action in March 2020.

The AA+ Package was sold from May 2005 to December 2015. According to ABC News the “manual nature of the bank's systems was compounded by it having no systems or processes in place to check whether customers were receiving benefits”.

In an ASIC Media Release commenting on the case, it is reported that ASIC (the regulator) alleged and CBA admitted, that:

  • contrary to the terms of the AA+ Package, CBA did not provide certain benefits to customers and, as a result, customers were overcharged fees and interest on loans and fees, and underpaid interest on savings. CBA also overcharged AA+ Package fees to certain customers;
  • the causes of CBA’s failures included the highly manual nature of CBA’s systems by which the AA+ Package benefits were applied as well as CBA having no systems or processes in place to check whether customers were receiving benefits; and
  • a total of 8,659 customers were impacted by CBA’s conduct on 131,542 occasions, in circumstances where CBA benefited from a total of $8,087,276.23 in incorrectly charged fees and interest on loans, and underpaid interest on savings.

Effectively, the bank “failed to ensure it could fulfil the promises made to customers on the AgriAdvantage packages over a protracted period”.

The Judgment

The Court found that CBA had breached provisions of the Australian Securities and Investments Commission Act 2001 (Cth) and Corporations Act 2001 (Cth) through the failures of their AgriAdvantage Plus Package. The Court also ordered CBA to publish a Corrective Notice in the form determined by the Court.

In his judgment, Beach J said at [para 8]:

“… its contraventions arose out of its failure to establish and maintain systems and processes to ensure that it could provide the AA+ Package benefits in accordance with the AA+ Package terms and conditions. In my view, this should be seen as a specific systems deficiency rather than a broader deficit in CBA’s corporate culture …”

His Honour further noted at [para 9]:

“… Throughout the relevant period there was a poor control environment with no adequate system for reporting issues with the AA+ Packages. Further, CBA’s complaints handling processes were inadequate …”

His Honour also said he accepted that “a penalty of $5 million may be seen to be on the light side”, however, he placed it in the context that the bank took “early self-generated steps” to pay back customers and reported the issue to ASIC in 2014.

Beach J said the aim of generally deterring future law-breaking was served by the “$5 million penalty, my declarations and any consequent reputational damage”.

Comment from the Regulator

ASIC Deputy Chair Daniel Crennan QC said in a statement:

“ASIC considers that CBA's conduct in this matter, which was examined in detail during the Financial Services Royal Commission, was the result of inadequate systems and processes. Because of its conduct, CBA failed to deliver its AgriAdvantage package efficiently, honestly and fairly as it was obliged to do under s 912A of the Corporations Act. As a result, over 8,000 customers were affected.”

Comment from the CBA

According to ABC News, CBA issued a statement apologising to customers:

“CBA did not defend the proceedings and accepts the penalty as appropriate in this case. We apologise to those customers who at the time didn't receive their AgriAdvantage Plus package benefits or were overcharged fees. We have sent refunds of approximately $8 million (including interest) and there were 8,659 customers impacted. Failures of this sort are unacceptable.”

Remediation Paid by CBA

The CBA did not oppose the court action and had paid back the bulk of the money before the hearing began.

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