The Commonwealth Bank of Australia (ASX: CBA) share price is down with ASIC suing the big ASX bank.
What has CBA announced?
CBA has acknowledged that civil proceedings have been brought against it by the Australian Securities and Investments Commission (ASIC) in the Federal Court, alleging that the major bank has engaged in misleading and/or deceptive conduct.
What did the bank do?
The bank is being sued because there were allegedly errors by CBA where monthly account fee waivers were not applied to accounts for certain customers between 1 June 2010 and 11 September 2019.
CBA accepts these errors should not have occurred and has provided several breach reports to ASIC in relation to these issues. ASIC does not allege that any of the contraventions were deliberate. CBA said it has co-operated fully with ASIC during its investigation, however it does not accept the way that the alleged contraventions have been formulated in the proceedings and therefore will defend the matter.
How is CBA going to put things right?
CBA has apologised to all customers impacted by these issues. Remediation payments of $64.2 million (including interest) have been sent to customers. Of the total remediation payments, approximately 90% related to two fee waiver issues that were identified in 2017 and 2019.
The bank said that the remediation of customers affected by the issues in these proceedings has been completed. CBA said it continues to invest in strengthening its systems and procedures.
What to make of this
This isn’t like the huge problems that were uncovered in the Royal Commission a couple of years ago, and $65 million isn’t a material amount to CBA’s overall annual net profit. However, $65 million is a lot of money to most other businesses.
The banks are under greater scrutiny now by regulators ever since the Royal Commission. Cumulatively, the remediation has added up to a lot of money and there has been significant reputation damage.
CBA’s share price has run over strongly over the last six months, so I don’t think it’s worth pursuing at this stage. However, there may be ASX dividend shares that could be worth looking at for income.
