Financial Markets Authority files court proceedings against ANZ

Friday, 5 June 2020

The Financial Markets Authority (FMA) has filed High Court proceedings against ANZ, alleging the bank charged some customers for credit card repayment insurance policies that gave them no benefit.

The FMA proceedings have two causes of action.

Firstly, that ANZ issued duplicate insurance policies to some customers – the bank says 390 – which provided no additional benefits or cover, and charged premiums on those policies, during the period April 2014 and November 2019.

Secondly, ANZ issued and failed to cancel policies for ineligible customers, also charging premiums on those policies, during the period April 1, 2014 to May 2018. The bank says there were 439 of these customers.

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Financial Markets Authority chief executive Rob Everett. The FMA said it was not notified until June 2019.

The FMA’s proceedings relate to 307 of those customers, with policies between April 2014 and September 2019.

These two issues relate back to at least 2001. However, the FMA claim reflects the introduction of the Financial Markets Conduct Act 2013, which came into effect from April 2014.

The FMA claims that ANZ contravened section 22 of the Financial Markets Conduct Act by making false and misleading representations about the cover of the policies. The regulator is seeking declarations of contravention of the Financial Markets Conduct Act, pecuniary penalties and costs.

ANZ first identified the duplicate policy issue around September 2017 and the ineligible customers issue was identified around May 2018.

ANZ did not disclose either issue to the FMA or Reserve Bank during their joint conduct and culture review of New Zealand’s retail banks from May to June 2018. The review requested that ANZ disclose “any work under way to remediate any identified issues where conduct by your firm has resulted in detrimental outcomes for customers.”

ANZ first notified the FMA of both issues in June 2019.

FMA general counsel Nick Kynoch said: “While ANZ has embarked on their own remediation programme, and ultimately self-reported this matter, the case points to a failure of internal systems and controls resulting in customer harm over a significant period of time. Self-reporting is expected, and is taken into account by the FMA when determining the appropriate regulatory outcome. In this instance, we felt it appropriate to put the matter before the courts.

“ANZ sold a product that, for some customers, offered no benefit.”

ANZ said it had already offered compensation of about $440,000 to customers.

But the bank said it acknowledged that it had taken too long to report the issues to the FMA.

ANZ's board is chaired by former prime minister Sir John Key. He has been contacted for comment.

ANZ said it had since contacted all affected customers to apologise and compensate them for the issues, which it said were unintentional and caused by human error and systems issues.

“We’re very sorry this happened. We actively review our processes and systems to try and identify issues that could impact our customers. Where we find problems, we work to fix them for our customers,” said Ben Kelleher, ANZ managing director retail and business banking.

Sam Stubbs, founder of KiwiSaver provider Simplicity, said the FMA was unlikely to file court proceedings unless it felt there was a strong case for censure of ANZ.

'It sends a signal to the financial market that the FMA has teeth, and is prepared to go to court against New Zealand’s most profitable company. We welcome any actions by the FMA which send a signal to the market that bad behaviours won’t be tolerated.

'It's a classic example of poor bank culture and conduct over an extended period of time, exactly what the Reserve Bank and FMA investigated last year.

'This is a trust issue for ordinary New Zealanders. The ANZ has been a major seller of insurance, to many Kiwis, for many decades. They know when a policy delivers benefits to customers, yet their regulator seems to be saying they sold ordinary New Zealanders policies with no benefits. This is not a tinpot insurer we’re talking about here, it’s our biggest bank and most profitable company. We should be able to trust the ANZ. Can we? This brings, yet again, the issue of trust and our banks into the spotlight.'

Credit card repayment insurance is a form of insurance which covers some or all of a customer’s outstanding credit card repayments in certain circumstances, including in the event of a customer’s bankruptcy, redundancy, injury, illness or death.