FMA investigation finds two breaches of fair dealing laws
ANZ has admitted to breaching fair dealing laws and will pay $3.25 million to the Crown after an investigation by the Financial Markets Authority (FMA).
The payment follows an Enforceable Undertaking, with FMA confirming that ANZ breached the Financial Markets Conduct Act (FMCA) in two separate instances.
“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,” FMA head of enforcement Margot Gatland said in a media release.
Wrongly applied overdraft fees and interest
“The first breach was for wrongly applying fees and interest to customers’ accounts for unarranged overdrafts,” Gatland said.
Between Dec. 20, 2012, and May 31, 2023, some customers who went into unarranged overdraft were charged both an unarranged overdraft fee and excess interest, even when the payment was ultimately dishonoured by ANZ.
However, ANZ’s terms and conditions only allowed for either the unarranged overdraft fee to be charged, or the payment to be dishonoured – not both.
Since the FMCA came into force in April 2014, 209,960 ANZ customers were affected. The total overcharged amount since that time is $4,373,972, including $3,494,894 in fees and $879,078 in excess interest.
ANZ has also paid “use of money” amounts of $1,019,459. The bank has made remediation payments to all current customers affected, made reasonable attempts to contact former customers, and paid all former customers who have claimed payments.
Incorrect demands for repayment of mortgage incentives
“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,” Gatland said.
ANZ had provided cash contributions to some customers who took out new home loans, on the condition they kept their banking with ANZ for two to three years. The bank sought repayment from customers who discharged their mortgage within that period, assuming they had moved their banking to a competitor.
However, in some cases, ANZ could not verify that customers had breached the agreement and has since remediated 1,019 customers in this category. By requesting repayment under these circumstances, ANZ breached s 22(h) of the FMCA, as these were false representations of ANZ’s right to require payment.
Remediation, new processes, and FMA response
Since self-reporting to FMA, ANZ has introduced a new process requiring customers to provide a reason for discharge and clarifying when repayment of a cash contribution can be required.
“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,” Gatland said.
FMA acknowledged ANZ’s cooperation throughout the 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,” Gatland said.
ANZ has also committed to developing and maintaining effective policies, systems, and processes to support good customer outcomes and prevent similar issues in the future, RNZ reported.
An ANZ spokesperson said the bank accepted the FMA’s findings: “We remain committed to doing the right thing by our customers and continuously improving how we operate.”
“It is essential that customers can continue to have confidence in their bank,” said Gatland. “We will continue to respond to misleading practices to help ensure New Zealand has fair, efficient and transparent financial markets.”
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