ANZ pleads guilty over credit card fees
30 March 2006/115
ANZ National Bank pleads guilty over credit card fees $10 million in refunds, record $1.325 million fine
The ANZ National Bank Limited has pleaded guilty in the Auckland District Court to 45 charges of breaching the Fair Trading Act by failing to properly disclose fees charged for overseas currency transactions on its credit cards.
The Fair Trading Act provides for accurate information to be given to consumers, and in sentencing today Judge Hubble said that for financial organisations "there is even more of an obligation to ensure that there is openness and frank disclosure, particularly in relation to fees."
Judge Hubble added that the offending of the bank "strikes at the heart of the objectives of the Act. It is the very offending the Act tries to prohibit to ensure consumer protection."
The ANZ National Bank has been fined a total of $1.325 million and has agreed to pay $10 million in refunds to customers who made foreign currency transactions on their credit cards. Consumers should receive their refunds this year.
The fine is the highest ever imposed under the Fair Trading Act. The previous highest penalty imposed at one time on a single company was a $60,000 fine imposed on EcoWorld in 2005.
At the time the offending occurred, the two banks were separate. 19 of the guilty pleas relate to the actions of the ANZ bank, and 26 to the National Bank. For ANZ customers the relevant period is 1 December 2001 to 8 July 2004. For National Bank customers the relevant period is from 1 February 2002 to 20 September 2004.
The Commerce Commission investigated after consumers complained that fees were being charged on top of the exchange rate and were not adequately disclosed. The fees were not shown on bank statements or in the transaction schedule, and in some instances were not even mentioned in the banks' terms and conditions or fee schedules. Customers paid fees between 2% and 2.5% of the total transaction.
Commerce Commission Chair Paula Rebstock said the result was an important victory for New Zealand consumers, many of whom would have unknowingly paid the currency transaction charges.
"The guilty pleas by ANZ National Bank and its willingness to take responsibility for refunding consumers has resulted in a speedier resolution of the issue than would otherwise have been possible," Ms Rebstock added.
The result was also important for competition in New Zealand said Ms Rebstock. "While fees like these remain hidden, banks have no incentive to compete with each other to offer customers lower fees."
"The Commission considers that disclosing the fees will result in greater competitive pressure and have the ultimate result of reducing the fees charged to customers."
Ms Rebstock noted that, since the Commission's investigation began, banks had changed their approach and begun disclosing the fees charged on overseas currency transactions.
Under the settlement the ANZ National Bank will be responsible for contacting affected cardholders, including those who are no longer customers. The $10 million will be placed in a trust account to be administered by an independent auditor.
The Commission's prosecutions of BNZ, Westpac, ASB, TSB, American Express, Diners Club and The Warehouse Financial Services continue, and the Commission will not comment on the ongoing proceedings.
The settlement does not stop customers from taking their own action under the Fair Trading Act.