ANZ sued over offset account, package failures

ASIC has claimed in a new lawsuit filed in the Federal Court, that between the mid-1990s and September 2021, ANZ failed to provide certain benefits, which included fee waivers and interest rate discounts, to around 580,447 customer accounts.

The result saw ANZ need to remediate nearly $200 million to impacted customers.

The matter has marked ASIC’s final investigation into a royal commission case study from the big four bank.

As part of the lawsuit, the regulator has attacked ANZ’s Breakfree package, which was introduced in 2003.

The package offered fee waivers, interest rate discounts on eligible ANZ products such as home loans, credit cards and transaction accounts and other benefits in exchange for paying an annual fee.

But ASIC has said the entitlements were not always provided to customers.

The regulator has also claimed that ANZ’s offset customers were entitled to interest rate reductions on eligible home and commercial loans but they were also not always provided.

The regulator has pointed to breaches of misleading or deceptive provisions of the ASIC Act, as well as breaches of the general obligations owed by financial services licensees under the Corporations Act.

ANZ has admitted to making false or misleading representations to customers that it had systems and processes in place that were adequate to provide customer account benefits.

System errors had affected the calculation offset benefits, including when customers made payments into their accounts on weekends or non-business days.

It has also stated its systems and processes were not capable of delivering the benefits consistently and that it breached its obligations as a financial services and credit licensee to provide services honestly, efficiently and fairly.

ASIC has sought declarations, pecuniary penalties and other orders against ANZ.

The bank and regulator will submit to the court that a penalty of $25 million is appropriate, with ANZ declaring that it does not intend to contest the proceeding.

“While ASIC has not alleged deliberate conduct, ANZ acknowledges its conduct fell short of expectations and has cooperated fully with ASIC during its investigation,” the bank stated.

ASIC deputy chair Sarah Court commented the bank’s conduct had been “long standing” and impacted more than half a million customers.

“These customers were entitled to receive the benefits they signed up for and in many instances paid for,” Ms Court said.

“This case is yet another example of a widespread system failure by a major bank impacting thousands of customers.”

She added it aligned with ASIC’s other royal commission investigations, which saw a “constant theme” of large financial services entities failing to honour agreements with customers and to ensure proper processes and systems are in place to prevent compliance shortfalls.

According to the bank, its remediation program for the offset account issues is complete, while the majority of customers have been remediated for the Breakfree package issue.

Remaining payments for Breakfree are expected to be finished over 2022 to 2023.

The date for the first case management hearing is yet to be scheduled by the court.

The lawsuit has been filed two weeks after ASIC slapped ANZ with another action, regarding its home loan introducer program and unlicensed third-party referrals. 

[Related: ANZ opens digital offering]