ANZ Penalty Shows Banks Still Treating Compliance Failures As Cost Of Doing Business

The Banking Class Action says today’s Financial Markets Authority announcement that ANZ has admitted to breaching fair dealing laws and agreed to pay a $3.25m penalty again highlights the failure of banks to invest in the systems and processes needed to protect their customers.

Scott Russell, the lawyer leading the Banking Class Action which represents tens of thousands of ANZ and ASB customers, said:

“Banks have a clear duty and obligation to protect their customers. Customers should be able to trust their bank to act in their best interests and safeguard their hard-earned money. Yet again, we are seeing that trust eroded. This case shows that for more than a decade, ANZ wrongly charged fees and interest to over 209,000 customers. The penalty which equates to just $16 per customer over 11 years, can hardly be called a meaningful deterrent.”

Mr Russell said penalties must be large enough to incentivise change.

“From this, it seems that many banks are tending to treat breaches of the law as a cost of doing business. When you compare the penalties against the harm and the profits at stake, there doesn’t seem to be a real incentive for the banks to invest in better systems, controls, and governance. That’s precisely why Parliament designed the penalties in the Credit Contracts and Consumer Finance Act (CCCFA) to remove profits from banks when they break the law.”

He said today’s FMA decision underlines the importance of the Banking Class Action currently before the Courts.

“Just like the 209,260 ANZ customers affected here, the New Zealanders we represent in the class action were allegedly denied their legal rights when their banks failed to make disclosures we say were required. Instead of being accountable, ANZ and ASB are lobbying for retrospective law changes that will allow them to apply to reduce or extinguish refunds that we say they owe to their customers.”

“The message to Government should be clear. If penalties are watered down or erased retrospectively, there will be even less incentive for banks to take compliance seriously. That is not in the interests of consumers, the financial system, or New Zealand’s reputation as a fair and predictable place to do business.

“Consumer protection laws exist to keep powerful institutions honest. They are not optional, and they are not negotiable. Weakening them only leaves ordinary New Zealanders exposed,” said Mr Russell.

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