ANZ Bank Pays $3.25 Million Penalty for Misleading New Zealand Customers

ANZ Bank’s New Zealand operation has agreed to pay a $3.25 million (US$1.92 million) penalty after admitting it twice breached fair dealing laws. The agreement was reached after an investigation by the Financial Markets Authority (FMA).

The first breach involved wrongly charging fees and interest to customers whose accounts went into arrears without first having applied for an overdraft facility—what banks call an “unarranged overdraft.”

But just as the bank had not agreed to the overdraft, the customers had not agreed to pay those fees and interest either. ANZ’s terms and conditions allowed it to either charge a fee or dishonour the payment that pushed the account into arrears, but not both.

This occurred between Dec. 20, 2012, and May 31, 2023, and affected 209,960 of the bank’s customers. However, since the Financial Markets Conduct Act (FMCA) came into force on April 1, 2014, the FMA can only examine ANZ’s conduct from that date onwards.

The total dollar value of overcharges was $4,373,972, comprising fees of $3,494,894 and excess interest of $879,078.

ANZ has repaid all affected customers who are currently with the bank, has made attempts to contact any former customers who were impacted, and has repaid any who have made claims. It has also paid “use of money” amounts totalling $1,019,459.

Customers Forced to Repay Incentives

The second breach involved the bank reclaiming incentives previously given to customers for repayments of mortgages.

ANZ provided cash contributions to some customers when they obtained a new floating, fixed, flexible, or business home loan, provided they kept their banking with ANZ for the next two to three years.

However, if a customer paid off their mortgage within that two- to three-year period, the bank sought repayment of the incentive money on the assumption that the customer was moving some of their banking to a competitor in breach of the terms on which the cash contribution was made.

In some instances, the bank has not been able to verify that the customer breached the agreement to keep banking with ANZ and has therefore had to repay 1,019 customers who fall into that category. That breached the law because it amounted to a false representation of ANZ’s right to require repayment of the cash contribution.

Since self-reporting to the FMA, ANZ has introduced a new process that requires customers to provide a reason for discharging their mortgage and clarifies that the bank can require customers to repay the cash contribution if they fail to provide this information.

“Banks are required to ensure representations they make to customers about overdraft fees and cash contributions are not misleading and do not cause harm to customers. ANZ made false representations in both instances,” said FMA Head of Enforcement Margot Gatland.

“It is essential that customers can continue to have confidence in their bank.”