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CBA share price on watch after ASIC commences civil proceedings

The Commonwealth Bank of Australia (ASX: CBA) share price was out of form on Monday and played a big role in the S&P/ASX 200 Index (ASX: XJO) recording its worst daily decline in over three decades.

The banking giant’s shares fell a disappointing 10% to finish the day at $59.72.

Shareholders will no doubt be hoping that Tuesday will be a better day. However, the company’s shares will have to contend with an after-hours announcement today.

What did Commonwealth Bank announce?

This afternoon Commonwealth Bank acknowledged that civil proceedings have been commenced by the Australian Securities and Investments Commission (ASIC) in the Federal Court.

This is in relation to two matters referred to ASIC for investigation by the Financial Services Royal Commission.

According to the release, Commonwealth Bank intends to admit the allegations made in ASIC’s Concise Statements for both matters and does not intend to defend the proceedings.

What are the matters?

The first relates to its AgriAdvantage Plus package. ASIC has commenced proceedings alleging contraventions of the consumer protection provisions of the ASIC Act.

The alleged contraventions relate to the bank’s conduct in relation to the AgriAdvantage Plus package. This includes overcharging package fees and its failure to provide benefits to customers that paid annual package fees between 2005 and 2015.

The second relates to gambling with credit cards. The alleged contraventions relate to CBA’s conduct in providing a credit card limit increase to a customer in 2017, where the customer had notified it that they were a problem gambler and did not want to accept credit offers until they had resolved their gambling problem.

Chief Executive Officer, Matt Comyn, said: “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.”

In response to the credit card customer, the chief executive added: “In 2016 and 2017, we did not do the right thing by this customer and we apologise. In recent years we have implemented a number of changes to support our customers’ needs. The combination of support services and customer initiated transaction blocks, now provides our customers with greater control over their access to credit.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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