Following an investigation by the Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko, ANZ has admitted breaching fair dealing laws in an Enforceable Undertaking and has agreed to pay a total of $3.25 million to the Crown, in lieu of a pecuniary penalty.
FMA Head of Enforcement Margot Gatland, said: "ANZ self-reported two fair dealing breaches to us. We have investigated further and confirmed that it breached the Financial Markets Conduct Act (FMCA) in two instances.
"The first breach was for wrongly applying fees and interest to customers' accounts for unarranged overdrafts."
Between 20 December 2012 and 31 May 2023, when some customers went into unarranged overdraft, ANZ charged an unarranged overdraft fee, and excess interest, in circumstances where the payment was ultimately dishonoured by ANZ. However, ANZ's terms and conditions only allowed either the unarranged overdraft fee to be charged, or the payment to be dishonoured.
Since the FMCA came into force in April 2014, 209,960 ANZ customers were affected by the issue. The total dollar value of overcharges resulting from the unarranged overdraft fee being incorrectly charged since that time is $4,373,972, comprising refunds of $3,494,894 in fees and $879,078 in excess interest. ANZ has also paid 'use of money' amounts of $1,019,459. ANZ has made remediation payments to all impacted customers who are currently ANZ customers, has made reasonable attempts to contact all former impacted customers and has paid all former customers that have claimed payments.
"The second fair dealing breach of the FMCA by ANZ involved claiming repayment of mortgage incentives previously given to customers when it should not have," said Margot.
ANZ provided cash contributions to some customers when they obtained a new floating, fixed, flexible, or business home loan from ANZ, as long as they kept their banking with ANZ for the next two to three years. ANZ sought repayment from customers when they discharged their mortgage within that time, on an 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.
However, in some instances ANZ has since not been able to verify that the customer breached the agreement to keep its banking with ANZ and has therefore remediated 1,019 customers who fall within this category. By requesting these customers to repay the cash contribution on the basis that they had moved their banking to a competitor ANZ breached s 22(h) of the FMCA, in that they were false representations of ANZ's right to require payment of the cash contribution.
Since self-reporting to the FMA, ANZ has introduced a new process, which requires the customer to provide a reason for discharge and clarifies that ANZ can require the customer to repay a cash contribution if the customer fails to do so.
"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 Margot.
The FMA acknowledges ANZ's cooperation throughout its investigation.
"ANZ has agreed to make payments in lieu of pecuniary penalties pursuant to an Enforceable Undertaking, of $2,080,000 in respect of the overdraft fee representations and $1,170,000 in respect of the cash contribution representations."
ANZ has also recorded its commitment to developing and maintaining effective policies, systems, and processes to support good customer outcomes and to prevent issues like this from occurring in the future.
"It is essential that customers can continue to have confidence in their bank," said Margot. "We will continue to respond to misleading practices to help ensure New Zealand has fair, efficient and transparent financial markets."
