Regulator confirms bank’s fault in overdraft fee, cash contribution representations
The Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko has announced that ANZ made an enforceable undertaking, which admitted to breaching fair dealing laws and agreed to pay the Crown $3.25m in total instead of pecuniary penalties.
In its media release, FMA noted that its investigation of the bank preceded the enforceable undertaking.
FMA acknowledged that ANZ cooperated during the investigation and recorded its commitment to establishing effective policies, systems, and processes to strive for positive customer outcomes and avoid similar issues from recurring.
“It is essential that customers can continue to have confidence in their bank,” said Margot Gatland, FMA head of enforcement, in the media release. “We will continue to respond to misleading practices to help ensure New Zealand has fair, efficient and transparent financial markets.”
Gatland noted that ANZ self-reported two breaches of fair dealing laws. Upon investigation, FMA confirmed that the bank violated the Financial Markets Conduct Act 2013 (FMCA) in two ways.
FMA’s media release provided more information on these fair dealing breaches.
“The first breach was for wrongly applying fees and interest to customers’ accounts for unarranged overdrafts,” Gatland said.
In the media release, Gatland shared that ANZ agreed in its enforceable undertaking to pay $2.08m for the overdraft fee representations.
According to FMA, from 20 December 2012 to 31 May 2023, the bank charged customers unarranged overdraft fees and excess interest in situations where it later dishonoured the payment, even though its terms and conditions only allowed charging the unarranged overdraft fee or dishonouring the payment.
FMA said, since the FMCA took effect in April 2014, this breach impacted 209,960 ANZ customers and led to $4,373,972 in overcharges due to incorrect charges of unarranged overdraft fees, comprising refunds of $3,494,894 in fees and $879,078 in excess interest.
FMA noted that the bank:
“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.
In FMA’s media release, Gatland shared that ANZ agreed in its enforceable undertaking to pay $1.17m for the cash contribution representations.
According to FMA, the bank provided cash contributions to some customers obtaining new floating, fixed, flexible, or business home loans if they agreed to maintain their banking with ANZ for the following two to three years.
FMA said ANZ asked customers who discharged their mortgage within that period to repay the cash contributions because it assumed the customer was transferring their banking to a competitor, thus breaching the terms for the cash contributions.
FMA noted that, in some cases, the bank could not confirm whether the customer violated the agreement to keep its banking with ANZ. FMA concluded that ANZ breached s 22(h) of the FMCA by falsely representing its right to require payment of the cash contributions.
FMA accepted that the bank remediated 1,019 customers for the second fair dealing breach.
“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,” Gatland said. “ANZ made false representations in both instances.”
According to FMA, since it self-reported its breaches, the bank has established a process obligating customers to explain why they were discharging their mortgage. Without such an explanation, ANZ could require repayment of the cash contributions.
