The Australian Securities and Investments Commission (ASIC) has decided to sue National Australia Bank Ltd (ASX: NAB). The target is two of NAB's wealth management subsidiaries, NULIS Nominees and MLC Nominees, that charged superannuation members fees for services that weren't provided.
According to ASIC, around $100 million of fees were charged to hundreds of thousands of members. At first NAB said that it had provided other services and tools for free that equated to the fees charged, but ASIC has decided to go ahead with the case.
The AFR said that ASIC has sought at least 50 declarations involving communications with members it says were false and misleading in breach of 12DA of the ASIC Act, this can result in a penalty of $1.1 million to $1.7 million for each breach.
ASIC has estimated the whole scandal could amount to more than $1 billion. However, NULIS has already refunded members $35.9 million. On 26 July 2018 it announced it would provide further refunds, at a total of $87.1 million.
NAB is the first bank to face this type of civil case, although Westpac Banking Corp (ASX: WBC) recently settled on a $35 million penalty for contravening the National Consumer Credit Protection Act.
I wouldn't be surprised to see Commonwealth Bank of Australia (ASX: CBA) and Australian and New Zealand Banking Group (ASX: ANZ) face some sort of penalty in regards to something that came up in the Hayne Royal Commission. You may remember that Commonwealth Bank already has to pay a total of a $700 million AUSTRAC penalty.
Foolish takeaway
Not only are banks cyclical and riskier due to the housing market, but they are all receiving multiple fines and penalties, which can be a serious drag on performance as each scandal emerges and is rectified. The regulators are being more active.
UK banks are still sorting out scandals, such as PPI, almost a decade later. For me, the big four banks are a strong 'avoid' and I'd much rather own smaller quality growth shares in my portfolio.
