The claim has been filed against ANZ’s New Zealand bank and CBA’s Kiwi business ASB, in the Auckland High Court.
The law firm managing the lawsuit, Russell Legal, has declared the banks failed to refund more than 150,000 mortgage and personal loan customers interest and fees they were not entitled to charge due to violations of their disclosure obligations.
It has brought the lawsuit under the Credit Contracts and Consumer Finance Act 2003 (CCCFA).
Both ANZ and ASB have previously acknowledged they failed to provide accurate information to personal and home loan customers who varied the terms of their loans during particular periods, as required under section 22 of the CCCFA.
ANZ had provided inaccurate information to certain customers who varied their loans between 30 May 2015 and 28 May 2016, due to a codding error with a loan calculator that resulted in interest being miscalculated.
A spokesperson for the bank told Mortgage Business the issue resulted in some customers underpaying their loan by an average of NZ$2 a month for a period of time.
Meanwhile ASB had been unable to confirm that it sent any written disclosure information to certain customers who made specific changes to their loans between 6 June 2015 and 18 June 2019.
Both banks reported the issues to New Zealand competition and consumer credit regulator Commerce Commission and they entered into settlement agreements following investigations, in which they admitted to breaching a responsible lending obligation under the law.
In March last year, ANZ agreed to pay customers a further NZ$29.4 million in remediation, adding to NZ$6 million it previously doled out over the responsible lending contraventions. More than 100,000 customers were estimated to be affected.
The settlement surpassing $35 million was the largest the commission had made with a single bank.
Meanwhile, ASB reached an agreement with the Commerce Commission to pay NZ$8.1 million to its customers in May 2021, over disclosure breaches for more than 73,000 affected loan customers.
It admitted that it had failed to ensure its systems and processes were sufficient to ensure required information was given to customers with changes to their relevant repayment date, amount and frequency of their existing loans.
But in its new class action claim, Russell Legal has argued that customers have only received a fraction of what they were entitled to.
The law firm also reported the banks had sent “extremely vague” communications and actively dissuaded customers from querying the payments or taking further actions, using phrases such as “there’s nothing further you can do”.
Under the law, if a bank fails to comply with its disclosure obligations, it is not legally entitled to charge interest or fees on the affected loan until the failure is remediated, said Russell Legal principal and solicitor Scott Russell.
“To the extent a bank receives interest or fees it is not entitled to, it must refund or credit those amounts to the customer as soon as possible,” Mr Russell said.
“In this case, the banks have continued to charge interest and fees despite not being entitled to do so. The banks’ failures to refund their customers constitute serious breaches of the provisions of the CCCFA.”
Anthony Simons, an ASB customer and representative plaintiff in the class action stated the banks have managed to get off easily, by “hiring expensive lawyers” and agreeing to significantly reduced payments with regulators.
“Banks are the first to enforce the rules when they are owed money, yet they ask for leniency when they break the law. If we do not challenge this kind of behaviour, we are condoning it and allowing it to continue,” he said.
“Failing to refund money they’re not legally entitled to is not only wrong, it undermines the trust consumers have in these important institutions. If the money paid by customers is not the banks’ to keep, then they should give it back. Not just a portion of it, but all of it.”
A spokesperson for ANZ said that the bank was yet to see a copy of the claim, but it would be defending against it.
“ANZ considers that we have fairly remediated our customers and the matter has already been subject to regulatory oversight and resolution,” they said.
ASB acknowledged the proceedings in a statement filed on New Zealand’s Exchange (NZX), which said the bank intends to defend against it.
“The remediation of customers pursuant to the settlement with the Commerce Commission is continuing and is unaffected by the filing of the High Court proceedings,” ASB stated.
But Mr Simons added: “ANZ and ASB are massively profitable, very powerful banks with access to significant legal and compliance resources.
“As individuals, we are completely dependent on them to act responsibly and comply with the law when they’re dealing with our money.”
Barristers Davey Salmon QC and Ali van Ammers of Mills Lane Chambers are also managing the lawsuit, alongside Mr Russell.
The class action has been jointly backed by Australian litigation funder CASL New Zealand firm LPF Group.
“This is one of the most important class actions we have funded,” CASL managing director Stuart Price said.
“Extensive reviews into the culture and conduct of Australasian retail banks identified significant issues and a lack of accountability. We hope this class action will encourage better service and respect for all bank customers, deter future breaches and improve regulatory compliance.”
Sarah Simpkins is the news editor across Mortgage Business and The Adviser.
Previously, she reported on banking, financial services and wealth management for InvestorDaily and ifa.