Senior lawyer calls for investigation into MBIE's 'poor advice' on banking law

Tuesday, 29 July 2025

A senior lawyer representing borrowers who filed claims against ANZ and ASB over errors in loans documents is calling for an investigation into advice given by officials that she believes may have spooked the Government into deciding to retrospectively reduce their legal rights.

Rachael Reed KC has written to Attorney-General Judith Collins and public service commissioner Sir Brian Roche accusing the Ministry of Business, Innovation and Employment of giving “poor advice” to ministers by overestimating the potential exposure of the banks to lawsuits.

The criticism has been rejected by the ministry.

A spokesperson for Collins said she was taking advice on the letter and would respond to Reed in due course.

ANZ and ASB have been facing class action lawsuits filed in 2021 from borrowers who claimed they were overcharged millions of dollars in fees over a period of a few years ending in 2019.

Banking Association chief executive Roger Beaumont told a select committee earlier this month that any lender making any mistake, such as “getting a phone number wrong”, could be subject to draconian penalties that went far beyond compensating borrowers for their actual losses.

On one interpretation, the Credit Contracts and Consumer Finance Act could require banks repay all the fees and interest charged until the mistake was fixed, he said.

The Government introduced a bill in April that would change the law retrospectively so the courts would be able to apply discretion to ensure an outcome that was “just and equitable in the circumstances, irrespective of when the failure occurred”.

Reserve Bank modelling, quoted by Beaumont, estimated banks’ potential liability could be as high as $12.9 billion without such a change, posing a possible risk to the financial system.

But Reed described that as “a fantastical figure” in her letter of complaint.

That was evidenced by the fact that ANZ — the country’s largest bank — had rejected a $300m offer to settle to its lawsuit on the basis that sum was too high, she argued.

“ANZ claims only 17,000 customers were affected and says a claim of $300 million is too high. ANZ represents 30% of the market. How is $12.9b sector-wide even possible?”

The scenarios MBIE derived from the Reserve Bank’s modelling were presented to the select committee “without clarification of its assumptions, underlying principles, or the methodology used to generate the figure”, she said in her letter to Roche.

“The failure by MBIE officials has led ministers to rely on such fantastical figures, encouraging them to make decisions influenced by the Banking Association’s advocacy reinforcing those figures rather than objective analysis.

“In consequence, Parliament is being asked to legislate in an extraordinary manner targeting litigation that has been on foot for four years based on untested and demonstrably flawed modelling and without knowing how many New Zealander’s rights are impacted.”

MBIE had “failed to meet the civil service standards of thoroughness, and transparency,” she said in requesting an investigation.

Reed said in her letter to Collins that ministers appeared not to have been adequately briefed on the “critical uncertainties” the Reserve Bank highlighted in its own analysis.

“There is compelling evidence that MBIE officials have provided ministers and Parliament with incomplete, untested, and consequently potentially unreliable advice regarding proposed retrospective legislation.”

MBIE policy manager Andrew Hume said the ministry was satisfied with the quality of the advice it gave.

Although MBIE was not actively considering retrospective change when it undertook public consultation in 2024, some submitters raised concerns about the potential impact of historical disclosure breaches on lenders and the credit market, he said.

“MBIE felt it appropriate to investigate these concerns. I acknowledge that MBIE’s consultation on this matter was constrained by commercial sensitivities for lenders, and the active litigation underway.”

Ministers made final decisions on the legislation, which was currently in front of a selection committee for consideration, he noted.