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Australia and New Zealand Banking Group Limited (ANZ) has been ordered to pay the penalty after the Federal Court found the bank had failed to provide benefits such as fee waivers and interest rate discounts to approximately 689,000 customer accounts for over 20 years.
The financial services regulator had brought the lawsuit against the bank after claiming that ANZ failed to provide certain benefits, which included fee waivers and interest rate discounts, to customer accounts between the mid-1990s and up to September 2021.
A large bulk of the issues related to ANZ’s Breakfree package, (since withdrawn from market), offered fee waivers, interest rate discounts on eligible ANZ products such as home loans, credit cards and transaction accounts and other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.
ANZ’s offset customers were entitled to interest rate reductions on eligible home and commercial loans. However, it was found that these benefits were not always passed on to the customer.
The court found that ANZ had contravened the ASIC Act, the Corporations Act, and the National Consumer Credit Protection Act and had made “false or misleading representations” to certain customers when it represented that it had, and would continue to have, adequate systems and processes to provide them with the contractual benefits they were entitled to.
Nature and extent of the issue require ‘significant’ remediation, says judge
In handing down the $25 million penalty decision (to be paid within 30 days), Justice O'Callaghan said: “The nature and extent of the contraventions was such that they occurred over a substantial period of time and affected a large number of customers, leading to a significant amount of money needing to be remediated.”
Indeed, ANZ will pay over $211 million in remediation to impacted customers.
The judge noted that there had been a “significant delay in identifying impacted customers, and therefore remediating them”.
“Although the nature of the acts or omissions comprising the contraventions was that of inadvertence, the conduct continued as long as it did because of inadequacies within ANZ’s systems, which were compounded by inaction or ineffective action,” Justice O'Callaghan continued.
ANZ has also been ordered by the court to publish an adverse publicity order on its website and online banking login page.
It will also have to pay ASIC’s costs of and incidental to the proceeding.
Speaking of the decision, handed down today (26 October), ASIC deputy chair Sarah Court said: “Having the necessary systems and processes to ensure customers are given the benefits they are promised is not an optional extra, it is a requirement.
“ANZ is a large financial institution that for many years failed to prioritise and deploy the systems and processes necessary to fulfil its obligations.”
Ms Court concluded by saying that ASIC’s enforcement work “should act as a reminder to financial institutions that they must invest in their systems to ensure consumers are not adversely affected or harmed”.
Remediation expected to complete over the coming year: ANZ
The major bank noted that the court had “approved its agreement” with ASIC to resolve its court action relating to benefits including fee waivers and discounts not being applied under ANZ’s Breakfree package, as well as “system errors impacting offset account calculations”.
The bank said it has “enhanced its systems and processes to address these issues and is undertaking remediation programs”, with the remediation program for these offset account issues now complete.
“ANZ has also completed the majority of payments to customers impacted by the Breakfree package issues relating to home loans, transaction accounts and credit cards, with remaining payments expected to be made in early 2023,” the bank said in a statement.
“ANZ is targeting completing the remediation for the optional additional benefits over 2022–2023.”
The major bank highlighted that the court “accepted that ANZ’s conduct was not deliberate, and acknowledged ANZ’s cooperation during the ASIC investigation”, but added that the bank “accepts that its conduct fell short of expectations and apologises to its customers who have been impacted”.
The case was one brought about following ASIC’s enforcement investigations arising from the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry.
The total penalties ordered by the courts from ASIC’s litigation following the royal commission have so far totalled over $160 million.
There are seven further royal commission cases remaining before the courts.