150,000 borrowers involved in major legal battle
A years-long class action involving more than 150,000 customers is heating up, with ASB and ANZ rejecting a combined settlement offer of more than $600 million, and lawmakers now considering a law change that could limit lender liability.
RNZ outlined what the case involves, what’s at stake, and why it could have broader implications for the lending industry.
What’s the class action about?
The case alleges breaches of the Credit Contracts and Consumer Finance Act (CCCFA), which between 2015 and 2019 required lenders in breach of disclosure rules to refund all interest and fees charged during the non-compliant period.
- ANZ: A system coding error between 30 May 2015 and 28 May 2016 meant loan variation letters didn’t properly disclose accrued interest. ANZ says this resulted in undercharging.
- ASB: From 6 June 2015 to 18 June 2019, ASB allegedly failed to provide required disclosures when borrowers changed repayment terms in-branch or by phone.
The case is being brought on an opt-out basis, meaning all affected customers will be included unless they choose not to be. If successful, hundreds of millions could be reimbursed.
University of Auckland law lecturer Nikki Chamberlain described it as “the biggest consumer class action” in New Zealand history.
Haven’t the banks already compensated customers?
Yes, both banks disclosed the breaches to the Commerce Commission and made payments:
- ANZ paid $6 million initially, then an additional $29.4 million following a Commission investigation.
- ASB paid just over $8 million.
What’s the new law change?
A bill before Parliament would retrospectively change how compensation is calculated for CCCFA breaches between 2015 and 2019 – moving from an automatic refund of all interest and fees to a court-determined amount deemed “just and equitable.”
This change would only apply to unresolved cases and would limit the scope of the class action.
Why is it controversial?
Scott Russell, lawyer for the plaintiffs, said changing the law now “creates a dangerous precedent for everyone” and increases cost and delay for customers.
Chamberlain warned that retrospective changes erode trust in the legal system:
“If people can't rely on the rights and remedies provided by the law at the time of breach… it will absolutely impinge on the integrity of the legal system.”
She added that the change could make the case uneconomical to pursue and discourage litigation funders from backing future consumer claims.
What do banks and policymakers say?
Roger Beaumont, CEO of the New Zealand Banking Association, defended the proposed amendment: “Between 2015 and 2019, any lender who even made a small mistake… could be subject to a draconian provision in the law.”
He cited Reserve Bank modelling suggesting a potential $12.9 billion risk to the financial system under current rules.
Banking expert Claire Matthews said the law had swung too far in favour of consumers, creating incentives to find technical errors.
Settlement offer rejected
It proposed a cap on bank liability of either 68% of affected customer borrowing costs or a share of bank profits – 3.5% for ANZ and 5% for ASB.
Both banks rejected the offer, with ANZ calling it a “stunt intended to influence members of Parliament.”
Matthews said if the law change passes, the case may still proceed – but its value to claimants could drop.
“The litigation funders might decide it was no longer worth their while… because the costs would be too great,” he said.
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