The Commerce Commission said ANZ New Zealand would pay customers $29.4 million, in addition to the $6 million previously paid, after it admitted a breach of its responsible lending obligations in relation to a coding error in a loan calculator.
The consumer watchdog says it is the biggest settlement it has reached with a single bank and its first completed responsible lending case. The Commission is now seeking a declaration from the High Court that ANZ NZ’s conduct breached the Credit Agreements and Consumer Finance Act.
ANZ NZ failed to take the necessary precautions required of a responsible lender when providing information on loan variations to more than 100,000 customers, according to the Commission. The issue has affected personal and home loan customers who have agreed with ANZ NZ to modify their loans.
For its part, ANZ NZ says it is sorry the issue has occurred, has worked quickly to resolve the issue, has acknowledged it and is ensuring that no customer is disadvantaged, with further other payments to affected customers to be made in the coming months.
ANZ NZ says it had a problem with a loan calculator between June 2015 and May 2016 which meant that some interest to be charged to customers was missed when calculating their repayments or loan term.
(See our previous story on this issue here).
Below is the statement from the Commerce Commission.
Commission gets extra $29.4m for ANZ customers after responsible loan breach
ANZ Bank New Zealand Limited (ANZ) has signed a settlement agreement with the Commerce Commission admitting a breach of its responsible lending obligations, and also agreed to pay customers an additional $29.4 million.
In the Commission’s first responsible lending case, the bank admitted that when it provided loan variation information to more than 100,000 customers, it failed to take the necessary precautions required of a responsible lender .
ANZ has already paid around $6 million to affected customers as a result of the error. After investigation, the Commission was able to obtain an additional $29 million for the affected customers. The settlement is the largest the Commission has had with a single bank.
As part of the settlement, ANZ agreed to admit in the High Court proceedings that it had engaged in conduct which breached its responsible lending obligations. The Commission is now asking the High Court to declare that the bank’s conduct breached the Credit Agreements and Consumer Finance Act (CCCF Act).
In May 2018, ANZ publicly confirmed that it had misreported the amount of interest on loans from 30 May 2015 to 28 May 2016 due to a coding error in a loan calculator used by its frontline banking staff. . The issue affected personal and home loan customers who agreed with the bank to modify their loans. ANZ reported the issue to the Commission in 2017.
Under the CCCF Act, each lender must exercise the care, diligence and skill of a responsible lender in all initial and subsequent dealings with borrowers.
Customers covered by this settlement will be contacted directly by ANZ by physical letter.
As the matter is before the Court, the Commission will not comment further at this time.
context
Principles of lender responsibilityLenders who enter into or modify consumer credit agreements after June 6, 2015 are required to comply with the principles of lender responsibility, as set out in the CCCF law.
The Lender’s Responsibility Principles require lenders to exercise the care, diligence and skill of a responsible lender at all times, including when advertising, before taking out a loan and in all transactions later with borrowers and guarantors.
These principles apply not only to consumer credit, but also to credit-related insurance contracts, guarantees and buy-back transactions. Lenders must act prudently and responsibly at all times and treat borrowers reasonably and with respect.
And here is the statement from ANZ.
Additional Loan Calculator Error Payments
Between June 2015 and May 2016, ANZ had an issue with a loan calculator which meant that certain interest to be charged to customers was omitted when calculating their repayments or loan term.
The Commerce Commission today announced that it has agreed with ANZ that ANZ will pay certain customers affected by the issue an additional $29.4 million, on top of the $6 million that ANZ has already paid.
“We have been working with the Commerce Commission since 2017 to help them understand what happened and its impact on our customers,” said Ben Kelleher, managing director of retail and business banking for ANZ.
“In 2018, we wrote to the affected customers, and if the customers were paying less because of the problem, we gave them credit, so the customers paid less than they agreed to in their loan agreement.
“While we believe our initial payment to affected customers was fair and better than the overseas examples, after discussions with the Commission we will make an additional payment to approximately 86,000 accounts to acknowledge that we have not fulfilled our responsibilities to lender under Section 9C (2)(a)(ii) of the Credit Agreements and Consumer Credit Act 2003.
“ANZ is sorry this issue has occurred. We have worked quickly to resolve the issue, have acknowledged it and have ensured that no customer is disadvantaged. We will begin making the additional payments to affected customers during the next few months.”
All amounts relating to this case have been provisioned for the period up to September 30, 2019.
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