NAB’s bold attempt to have evidence kept secret has backfired with the Hayne royal commission revealing the bank’s failure to meet deadlines, attempts to bury the inquiry in paperwork and withhold evidence.
Commissioner Hayne opened the hearing on Thursday morning with his reasons for rejecting a request for non-publication from NAB where he spoke of the need to balance the public’s right to know with the need to protect commercial interests.
“It is in the public interest that there be an open and transparent inquiry about how both the regulator and the regulated deal with the issue of remediation,” Commissioner Hayne said.
Among the seven pieces of evidence that NAB was attempting to keep out of the public sphere was an ASIC document titled “Outline of suspected offending by NAB Group” from October 2017. It dealt with the bank’s involvement in charging fees for no service, plan service fees conduct and remediation of those wrongly charged fees.
Among the findings in the document were claims that the bank had received as many as 40 complaints from super fund members about being wrongly charged fees as far back as 2011.
After Hayne rejected NAB’s claim for legal and professional privilege, counsel assisting Michael Hodge QC detailed the chain of events that led to NAB’s ambit claim for secrecy.
Mr Hodge said NAB had been issued with a notice to produce documents relating to the fees for no service by July 9.
NAB did not produce the first set of documents in relation to that notice until more than ten days later on July 20 when it delivered 31 documents. It followed up with a further 500 documents and then dumped an additional 3000 documents on the royal commission last week.
However NAB withheld four documents that related to its discussions with ASIC over fees for no service and would not hand them to the commission until August 3. Mr Hodge said the other three documents of the seven that were the subject of NAB’s legal professional privilege claim were never given to the commission.
“Unfortunately that particular matter of responding to your compulsory notice has contributed to some of the difficulties that the NAB has faced in dealing with some of these confidentiality matters,” Mr Hodge said.
Among the issues the documents explore is NAB’s attempts to introduce the concept of “fair value exchange”, where NAB argued that while it did not provide the services it charged customers for, the bank provided other services that may have been of equal value and therefore no compensation was needed.
An email from ASIC on December 22, 2016 rejected the bid to minimise its offending as wholly inappropriate.
“We do not agree that the fair exchange of value concept you have described to us as a customer centric approach. We do not consider it acceptable or NAB to include such concept in its methodology for its current review,” the email read.
But NAB would continue to push the idea that it could find other services that met the definition of advice.
ASIC’s senior executive leader of financial services enforcement Tim Mullaly wrote to NAB’s chief legal counsel Sharon Cook on November 3, 2017 and warned her that this was not an acceptable approach.
“The most recent position NAB has put forward as the basis for its remediation approach in these matters is a concept of measuring ‘customer/adviser interaction’ or assessment of whether the ‘spirit’ of customer agreements was adhered to,” the letter reads.
“ASIC does not consider this approach is appropriate to replace the express commitments given by NAB to its customers in service agreements.”
The developments follow a horror day for the big four banks on Wednesday where Commissioner Hayne raised the prospect of criminal charges for taking money to which it was not entitled and the bank admitted it had been charging a number of dead customers for financial advice.