Australia’s newest bank might be facing possible enforcement action from regulators after it was expelled as a member of the financial industry’s peak external dispute resolution scheme.
Banking Day confirmed on Wednesday that the Australian Financial Complaints Authority revoked the subscription of Sydney-based deposit taker In1bank on 19 November last year.
According to AFCA, the bank’s membership had not been reinstated as of early yesterday afternoon, which means that any customers of In1bank would not have had recourse to the scheme for almost four months.
In 2018 the Australian Securities and Investments Commission made AFCA membership a requirement for any financial institution holding a financial services licence(AFSL) or credit licence.
Banking Day yesterday approached In1bank founder and chief executive James Tong to understand why the company had not been complying with the AFCA membership requirement as a financial services licensee.
Despite being notified of the bank’s expulsion from the complaints scheme last November, Tong indicated his organisation would act “as soon as possible” to address the issue.
“We are currently investigating the issue raised with a view of rectifying the same asap,” Tong said in an email to Banking Day.
“At this stage, it would appear that the issue is caused by non-payment of membership fee (possibly due to an expired credit card and/or the incorrect email address used).”
In comments emailed to this publication later in the day, Tong indicated his bank was in the process of reporting the matter to ASIC and renewing AFCA membership.
However, he also revealed that the bank had not acquired any customers since it secured a restricted banking authority from APRA in December 2019.
“We are in the process of reporting to ASIC to ensure that we comply with all licensing conditions even though we are still in the implementation period with no customers,” he said.
“Our (AFCA) membership fee is paid today covering the period from November last year and our membership is likely to be restored once the payment is cleared.”
ASIC has been aggressively enforcing the AFCA membership requirement since 2019.
In July of that year it cancelled the licences of 50 financial services providers that had failed to maintain affiliation with the scheme.
In1bank is more than half way through a two-year restricted licence period that allows it to raise up to A$2 million of deposits from Australian customers.
The company has until the end of the year to meet the prudential requirements for a full APRA licence otherwise it will have to return any depositors’ money and cease operating as bank.