A big four bank has today announced that its cash earnings in first half 2019 have been reduced by an estimated $260m due to its customer remediation programs.
Westpac revealed that the cash earnings of customer remediation provisions for the full year of 2017 and the full year of 2018 were $118m and $281m respectively, so the newly released figure shows a sharp increase.
Westpac announced that the key remediation items include:
• Customer refunds associated with certain ongoing advice service fees charged by the group’s salaried financial planners
• Refunds for certain consumer and business customers that had interest only loans that did not automatically switch to principal and interest loans when required
Westpac CEO Brian Hartzer said, “As part of our ‘get it right put it right’ initiative we are determined to fix these issues and stop these errors occurring again. We will continue to review our products and services to ensure they deliver the right outcomes for customers, and if necessary, make further provisions.”
Westpac will commence remediation in the group’s second half 2019 for customers of authorised representatives still operating under BT Financial Group’s licences.
Work is also underway to determine the extent of the services provided by authorised representatives who are no longer operating under BTFG’s licences, including those who have left the industry.
According to a statement from the bank, this remediation program is more challenging, because many of the authorised representatives’ files have been difficult to access.
In relation to this issue, Westpac released the following information:
• Total fees received by authorised representatives in 2008 to 2018 were approximately $966m
• Within this total, fees received from customers by authorised representatives still operating under BTFG’s licences in the period 2008 to 2018 were approximately $437m
• For customers of authorised representatives, Westpac has not yet been able to finalise a reliable estimate of the proportion of fees that may need to be refunded
• Interest on refunded fees and additional costs to implement this program will also need to be considered when determining any remediation provisions
