The penalty signals that manual processes without quality controls are unacceptable
The High Court on 4 March 2026 ordered ASB Bank to pay $2.1m for overcharging customers across two financial products. More than 25,000 customers were affected during the contravention period from 1 April 2014, with the total number affected reaching approximately 38,586 over the full period of both failures.
In Financial Markets Authority v ASB Bank Limited [2026] NZHC 434, decided on 4 March 2026, ASB, one of New Zealand's four largest registered banks, admitted making false or misleading representations in connection with the supply of financial services, across two separate product failures spanning its internet banking fee structure and insurance discount arrangements. The penalty represented $2.1m of a $10m global maximum.
The first failure involved ASB's FastNet Business (FNB) service, an internet banking service for business customers. From around 31 December 2011, ASB intended to apply fee exemptions to customers holding Business Focus, Society Cheque, and Education Administration accounts. Instead, the bank relied on a manual process with no quality checks and failed to apply the exemptions to some eligible customers. A product review in late 2018 identified the issue, and ASB identified the absence of exception reporting again in August 2019, but the bank did not substantively address it until the issue surfaced again in November 2020. Between April 2007 and October 2021, ASB overcharged approximately 3,818 customers a total of $1.4m, of which $1.147m fell in the period after the FMCA took effect in April 2014.
The second failure concerned multi-policy discounts (MPD) on ASB-branded insurance policies that ASB marketed and facilitated as agent for IAG New Zealand, which issued and underwrote the policies. From February 2009, customers holding more than one personal home, contents, or car policy qualified for a premium discount. ASB staff applied the discount manually by ticking a box in the ONYX GI system, and in some cases failed to do so. Staff also told some customers that caravan and trailer policies qualified for the discount when they did not. Between February 2009 and May 2022, up to 34,768 customers paid approximately $6m more than they should have.
Justice O'Gorman set a $3m starting point, drawing a comparison with FMA v Kiwibank Ltd [2023] NZHC 2856, where the court adopted a $1.25 million starting point. The court applied a higher figure here because consumer harm reached almost five times the Kiwibank level, and ASB held notice of both issues years before it acted.
The delay on the MPD issue drew particular scrutiny. From 2013, a banking consultant raised concerns about incorrect discount applications 61 times to his direct line manager. The emails reached sales teams at both ASB and IAG, but the problem never reached management. The consultant recorded a request to reduce his reporting of the issue. The MPD issue did not reach ASB senior management until late 2020, and a formal investigation did not begin until June 2021. When ASB initially notified the FMA of the MPD issue, it said the problem was first identified in June 2021, which understated the full history.
Justice O'Gorman found that "reliance on manual systems prone to human error without adequate checks and balances was below the standards expected of the banking sector" and that any penalty must create a strong incentive for financial institutions to maintain adequate systems and processes, including for error prevention, detection, and appropriate problem escalation.
Justice O'Gorman applied a 30 percent discount to the $3m starting point, recognising ASB's self-reporting, cooperation with the FMA's investigation, early admissions, and full remediation of all affected customers with interest. ASB paid $1.84m to remediate the FNB issue. ASB and IAG together paid $6.6m to remediate the MPD issue. In total, ASB refunded approximately $4.7m to affected customers.
The court made three separate declarations that ASB had contravened s 22 of the Financial Markets Conduct Act, the provision that prohibits false or misleading representations in connection with financial products and services. The declarations covered ASB's conduct in relation to the FNB fee statements, the MPD invoices, and the caravan and trailer representations, all on or after 1 April 2014. The court imposed a pecuniary penalty of $2.1m and ordered that the penalty be applied first to the FMA's costs in bringing the proceedings.
FMA Head of Enforcement Margot Gatland said: "This penalty reflects the seriousness of ASB's systems failures. Customers are entitled to rely on their bank to apply discounts and fee exemptions accurately. ASB's failed to detect and address these issues over many years."
She added: "We acknowledge ASB's cooperation, however, the duration of the failings and the delays in identifying and escalating the issues meant that a strong regulatory response was necessary." The FMA acknowledged that ASB self-reported the issues and carried out remediation.
