'ANZ let them down': Bank fined $280,000 for misleading customers

Friday, 5 March 2021

ANZ bank has been fined $280,000, which Justice Matthew Muir hoped would encourage other large corporates to invest in systems to identify when they wrong customers.

ANZ has been fined $280,000 for selling some customers credit card repayment insurance they were too old to claim on, and charging others for “duplicate” policies that offered no additional cover to them.

Credit card repayment insurance was designed to make repayments on behalf of a customer, if they fell ill, lost their job, or died.

Banks stopped selling credit card repayment insurance in New Zealand after mis-selling scandals in Australia and Great Britain, but concerns about it in New Zealand dated back to 2013.

The fine was handed down by judge Matthew Muir at the High Court in Auckland, who did not find the bank had intentionally mislead customers.

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In all, 307 ANZ customers were affected, with 300 having now had full refunds.

The mis-sold policies went unnoticed at the bank between 1997 and 2018, which the Financial Markets Authority argued was evidence of the bank’s “deficient processes and systems”.

ANZ only identified them in late 2017 and early 2018.

But it did not reveal them to the Financial Markets Authority and Reserve Bank in May and June of 2018 when the regulators were conducting a review of bank conduct in New Zealand prompted by the Australian Royal Commission into abuses of customers by banks and insurance companies.

This was not willful deceit by ANZ, the court found, but the result of inadequacies in the bank’s systems for gathering information to hand to the regulators.

The bank admitted selling policies to some people who were too old to make claims between 1997 and 2018, Justice Muir said.

Depending on the policy, customers could not make claims if they were older than 65, or 75.

ANZ also did not cancel some people’s policies when they reached those ages, but carried on charging the premiums.

In April 2014, 121 people held policies despite being too old to claim on them. They paid a combined $22,351 in premiums.

The bank also issued second policies to some people who already had policies, and charged them premiums, when those people got no extra cover from having them.

In all, 186 people were issued with duplicate policies, with ANZ charging them a combined $176,770 in premiums.The earliest of these policies was issued in 1998.

ANZ continued to charge for some duplicate policies until late 2019, the High Court found.

While the maximum possible fine was $10 million, Muir said: “ANZ submits that, because it did not misdescribe the products, but merely misled customers by charging them for products which provided no benefit to them, their conduct is unlikely materially to undermine confidence in financial markets.”

The bank argued its customers were only “partially uninformed”, as those issued with duplicate policies would have seen the premiums on their credit card statements.

Muir said the bank had also argued that people who were too old to claim on their policies could have identified the maximum age of eligibility by reading the terms of their policies.

“I do not find these arguments particularly persuasive,” Muir said.

Just because a “vigilant” consumer might have spotted they would not be able to make a claim, did not mitigate ANZ’s failures, he found.

“Consumers cannot be ‘confident’ in their participation if they are required to doublecheck the precise details of every transaction with their bank,” Muir said.

Muir said customers should be able to trust their bank.

“ANZ let them down,” Muir said.

“In my view this is precisely the sort of conduct which does undermine confidence in financial markets,” Muir said.

ANZ stopped selling credit card repayment insurance in 2019.

ASB stopped selling the insurance in February 2018, shortly after its parent bank CBA paid A$10m in refunds to 65,000 students and unemployed people unable to claim on the redundancy cover portion of its policies.

BNZ stopped selling it in October 2018, a full year before its parent NAB settled a class action lawsuit for A$49.5m with its lawyer Sharon Cook saying: 'We can only move forward if we deal with the past, so that we can earn trust among customers and the broader community and grow confidence in the future of NAB.'

Westpac stopped selling credit card repayment insurance at the same time as ANZ.