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Financial services no longer largest target for class actions

For the first time in more than a decade, the banking and financial services industry wasn’t served with the most class action lawsuits of any sector.

A new report on Australian class actions during the past year from law firm Allens has compared the number of lawsuits copped sector by sector.

As noted by Allens, the banking and financial services industry had long been the largest target for class action filings, but last year, the government and health sectors overtook it.

In 2021, there were 17 class actions filed against the financial services industry, compared to 32 the year before and 25 in the 2017-19 period.

The industry accounted for 17 per cent of all class action lawsuits in Australia, compared to 32 per cent in 2020.

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These included a class action against ANZ over its interest-free credit card contracts, alleging it wrongly charged interest. ANZ and CBA’s New Zealand units had also copped filings regarding wrongfully charged loan fees.

In comparison, the public sector had 21 lawsuits in 2021 (21 per cent of all filings, up from 13 per cent in 2020) and healthcare copped 19.

Other industries fell behind banking and financial services, such as technology, media and telecommunications, with its 11 lawsuits.

Allens partner Jenny Campbell called it an “interesting shift”.

“This is perhaps an indication that class actions arising from issues exposed in the royal commission are beginning to tail off,” the Allens report said.

“However, even if that is the case, we think it is too soon to make any predictions about a material decline in class action risk for this sector.”

However, the law firm has forecast that there will be activity relating to ASIC’s recent focuses around consumer risks, such as poor product design and governance, mis-selling and failure to comply with conflict of interest requirements and disclosure obligations as well as cyber scams.

“ASIC’s stated enforcement priorities for 2021 to 2022 include responding to elevated risks to consumers… with a focus on regulated sectors including financial advisers, investment managers, superannuation and insurance,” the report said.

“With class action activity already occurring in many of these areas, we expect this to continue in the near term.”

Overall, class action claims were down by 13 per cent over the year, but still above the level of filings five years earlier.

Consumer claims continued to be the most common type of claim during the year (occupying 23 per cent of claims), including lawsuits around superannuation fees, insurance policies and other issues such as medical devices, electricity prices and freight services.

Employment-related class actions occupied 19 per cent of class actions, while shareholders accounted for 15 per cent, their lowest levels in more than a decade.

Consumer claims are expected to dominate further, alongside a rise in lawsuits relating to climate change, and privacy and data breaches.

The report also noted growing uncertainty for litigation funding, against a backdrop of recent regulatory reforms.

[Related: ASIC ramped up lawsuits in FY21]

Financial services no longer largest target for class actions
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