ASB to pay customers $8.9 million for overcharging early repayment fees

Thursday, 17 June 2021

ASB dobbed itself in to the Commerce Commission when it discovered it had overcharged tens of thousands of home loan customers who broke their fixed-term mortgages seeking to refix them at lower interest rates.

The Commerce Commission has warned ASB after finding the bank had overcharged home loan borrowers early repayment adjustment fees.

The commission warned ASB it was likely to have breached lending laws by failing to act with the care, diligence and skill of a responsible lender, as well as breaching the Fair Trading Act by making false or misleading representations of its right to charge the incorrect fees.

ASB has agreed to repay about $8.9 million to borrowers who broke their fixed-term home loans between April 2005 and December 2016.

The bank has also provided the commission with “enforceable undertakings” explaining how it will locate the borrowers it overcharged to give them their refunds.

Financial Markets Authority chief executive Rob Everett and Reserve Bank governor Adrian Orr deliver the findings of their joint review into the conduct and culture of banks in New Zealand. First published in 2018.

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It is the second time this year ASB has had to pay money to customers as a result of mistakes that led to lending law breaches.

In May, it began making $8.1m in compensation payments to about 73,000 borrowers who had home loans and personal loans with the bank between June 2015 and July 2019.

As a result of the $8.9m settlement with the commission, impacted customers will be paid the difference between the amount they should have been charged, and the amount ASB actually charged them, together with interest, the commission said.

ASB began repaying customers in July last year and has already repaid a significant proportion of the $8.9m to affected borrowers, the commission said.

The bank had spotted its error, and reported it to the commission.

It told the commission that 48,000 ERA fees were overcharged for borrowers who had terminated their fixed rate term loans early between April 2005 and December 2016.

Nearly 11,000early repayment fees were also undercharged, the commission said.

“Of the affected loans, the majority of them were home loans, with a small number being business loans, asset finance, commercial, personal and rural loans,” commission chairwoman Anna Rawlings said.

“ASB accepts that it likely breached some of its obligations … when it charged [early repayment adjustment] fees that had not been accurately calculated,” she said.

“Lenders must implement robust systems and processes to help them to comply with their legal obligations. Those processes should include adequate checks to identify and rectify failures quickly if they arise,” she said.

“ASB has also made process changes to ensure the problem does not reoccur,” she said.

ASB issued a statement to apologise for the overcharging.

“We sincerely apologise for the error we made in calculating early repayment amounts charged to some customers who broke their fixed term loan agreements and the impact this may have had,” it said.

“This error occurred when customers received an indicative calculation of what the early repayment amount would be if they were to repay their loan early, but this amount was not recalculated and updated at the time the loan was repaid. We have made changes to our processes to ensure calculations are up to date going forward,” it said.

“Most customers who were overcharged have now been contacted and received a payment reimbursing them for the amount overpaid, plus an additional amount recognising that this money should have been available to them,” it said.