- Corporate regulator ASIC says it was a mistake to wait two years to investigate junk credit card insurance.
- Its chair James Shipton was questioned today about why it hadn’t started an inquiry until after the issue was aired in the financial services royal commission.
- He agreed the investigation should have started soon after the Commonwealth Bank notified of a problem in 2015.
Corporate regulator ASIC has admitted it made a “mistake” when it took two and a half years to take action after being notified by the Commonwealth Bank that 156,000 customers were out of pocket from junk credit card insurance.
The financial services royal commission was told today that the ASIC enforcement team accepted the referral from CBA only after the matter had been aired in a commission hearing.
The decision to start the investigation was not made until October 22 this year. CBA notified ASIC in May 2015.
Rowena Orr, senior counsel assisting the commission, asked James Shipton, the chair of ASIC, why the regulator hadn’t taken action in 2015 when the issue was first raised.
Shipton, who joined ASIC in February this year, said he was informed that credit insurance was an industry-wide issue and there was a focus on trying to advance remediation and get industry change on 11 financial institutions involved.
“When you’re dealing with industry-wide, arguably systemic misconducts, and systemic mistakes and failures of the financial institutions, we only have about 80 personnel in the team that handles that issue,” he told the hearing.
“So the context is, is that this was an overwhelming amount of work being dealt with by a team which is only staffed to 80 people.”
At a royal commission hearing in May, a senior CBA executive agreed that credit card insurance was sold to people who couldn’t claim because they didn’t have a job, including those on unemployment benefits, pensioners and students.
And this week Matt Comyn, the current Commonwealth CEO, told a hearing his predecessor Ian Narev told him to “Temper your sense of justice” when he proposed to stop selling the insurance three years ago.
In today’s hearing, ASIC’s Shipton, after further questioning, said: “I would certainly agree with you that it was a mistake not to commence the investigation much, much, much earlier.”
Orr: “When should it have been commenced, Mr Shipton?”
Shipton: “It is difficult for me to say with absolute precision, except to say that I think we should have been commencing an investigation along the same timeline as we were working, as I understand it, very hard on a remediation program.”
Orr asked whether the same issues raised today would have the same result.
Shipton: “The starting point today would be to ask the question and turn our minds to why not litigate this demonstrable breach. That is the clear guidance today that stands today. “
Orr: “Do you agree that the matters that you referred to, the fact that this was an industry-wide challenge, the fact that 156,000 customers were out of pocket, the fact that this was a systemic issue, were all matters that reinforced the need for you to take
strong action and commence an investigation?”
Shipton: “Most definitely … So I’m in most definite agreement that it was a mistake not to commence an investigation at that point in time.”