Criminal proceedings against CBA dismissed

This was alleged to have been in breach of ss12GB(1) and 12DB(1)(e) of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act).

While CBA had already refunded affected customers and pleaded guilty to the 30 criminal charges, the criminal proceedings have now been dismissed.

On 14 December 2022, the Federal Court made orders by consent dismissing the proceedings against CBA as it had found that the statute of limitations had now passed.

The issue arose after a separate court matter held in the full court of the Federal Court two weeks prior found that the limitation period requiring proceedings for an offence against s12GB(1) of the ASIC Act should be commenced within three years after the commission of the offence.

As the criminal charges related to behaviour between 2011 and 2015, the charges against CBA are now invalid, as they are now considered to be statute barred. 

The matter was being prosecuted by the CDPP following an investigation and referral by ASIC.

Each party must now bear their own costs.

A CBA spokesperson said: “We acknowledge the orders made by the Federal Court dismissing the proceedings brought by the Australian Securities and Investments Commission (ASIC) in relation to CBA’s sale of CCI products between 2011 and 2015.

“The proceedings were dismissed due to the effect of a limitation period which was recently considered by a decision of the Full Federal Court in proceedings against another financial institution. The result of this decision is that the offences brought against CBA were statute barred and cannot proceed.”

Background to the case

The criminal case related to CBA’s promotion and sale of CreditCard Plus and Loan Protection policies as an add-on insurance product in branches, by telephone and online.

According to the allegations brought by the ASIC, between 2011 and 2015, CBA made false or misleading representations to 165 customers by suggesting that the insurance policies had uses or benefits to those customers when part or all the benefits were not available.

This alleged behaviour focused on whether the bank did not adequately disclose to those customers at the point of sale that they were not eligible for certain benefits under the CCI policies because of their employment status.

The big four’s conduct was the subject of a case study by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. 

Last year, the bank said it would plead guilty to the charges and apologised to affected customers.

CBA said: “In 2011 the wrong decision was made to remove qualifying questions about the employment status of a customer from some mandatory sales scripts. Those questions would have disclosed at the point of sale whether the customer would be eligible for certain benefits under those policies.

“CBA will plead guilty to the charges and has agreed a Statement of Facts with ASIC and the Commonwealth Director of Public Prosecutions (CDPP).

“CBA first self-reported the issue to ASIC in 2015. ASIC investigated this matter following its consideration as a case study at the Financial Services Royal Commission.

“CBA has sent compensation to the 165 customers who are the subject of these proceedings where they paid premiums.

“CBA apologises to customers who were affected by these issues and accepts that this conduct was unacceptable.”

In a separate matter, CBA last month agreed to settle a CCI class action for $50 million (subject to court approval).

CBA noted the settlement also resolves the proceedings for the other defendants, Colonial Mutual Life Assurance Limited (CMLA) and AIA Australia Limited (AIAA).

“This class action relates to consumer credit insurance for credit cards and personal loans that were sold between 1 January 2010 and 7 March 2018,” a CBA spokesperson said.

“In agreeing to resolve the litigation, CBA, CMLA and AIAA make no admissions of liability.”

The bank added that should the court approve the settlement sum of $50 million, group members will be able to register for the settlement distribution scheme.

“The settlement distribution scheme will determine if individual group members are entitled to recover a share of the settlement sum, after accounting for any deductions which may be approved by the court, such as legal fees charged by the applicant’s lawyers,” the bank said.

A ban on unsolicited “cold call” telephone sales of CCI and direct life insurance took effect from 13 January 2020 after the financial services regulator raised concerns about CCI selling said products.

[Related: Major bank apologises for ‘unacceptable’ CCI conduct]