ASB to cough up $135.6 million to settle class action relating to home and personal loans between 2015 and 2019

ASB will pay more than $135 million to settle a class action for alleged breaches of the Credit Contracts and Consumer Finance Act (CCCFA) relating to home and personal loans between June 2015 and June 2019.

The case was brought by a group called Banking Class Action in 2021. The case was taken against ASB and ANZ. The case against ANZ continues with ANZ defending the claim.

The settlement with ASB was reached without ASB admitting liability and is subject to court approval.

"This is a positive outcome for affected ASB customers. After four years of litigation, settlement provides certainty, avoiding what would otherwise be a very long and expensive fight through the courts. It importantly also removes the risk around the Government’s proposed retrospective law change in the CCCFA Amendment Bill," Scott Russell, the lawyer representing the ASB plaintiffs, says.

"The settlement brings to an end four years of legal proceedings and provides certainty for us and for our customers. The agreement we’ve come to is a pragmatic way to settle this matter," ASB CEO Vittoria Shortt says.

An ANZ spokeswoman says ASB’s decision to settle is a commercial decision for them.

"ANZ NZ will continue to defend its case. Our position hasn’t changed. The potential consequences under the current law are disproportionate and not aligned with any actual harm caused."

"In ANZ NZ’s case, customers who underpaid their home loans by an average of just $2 per month could, under one interpretation of the law, be refunded the entire cost of borrowing up until today’s date. This is despite there being no customer harm," the spokeswoman says.

"ANZ NZ has already been subject of investigation and enforcement action by the Commerce Commission in relation to the issues that are subject to the class action, after it self-reported those issues. ANZ NZ made itself accountable. ANZ NZ agreed to pay more than $35 million to affected customers, leaving them all better off than they would have been if the issue hadn’t occurred."

Banking Class Action alleged ANZ and ASB breached section 22 of the CCCFA by failing to provide proper disclosure information to customers who made agreed changes to their loans during the relevant periods, which were 6 June 2015 until 18 June 2019 for ASB customers, and 6 June 2015 until 28 May 2016 for ANZ customers.

The Banking Class Action case is being funded by Australian litigation funder CASL and New Zealand litigation funder LPF Group. In 2021 they said legal fees and services payable to the funders would total between 16% and 23.5% of any money the banks were to cough-up.

Here's ASB's statement.

ASB reaches agreement to settle CCCFA class action

ASB has agreed to pay $135,625,000 to settle a class action against the bank for alleged breaches of the Credit Contracts and Consumer Finance Act (CCCFA).

The class action relates to disclosure documents that ASB was required to provide to customers who had requested changes to their lending arrangements between 2015 and 2019 and whether one potential interpretation of the CCCFA legislation was the correct one.

CEO Vittoria Shortt says, “The settlement brings to an end four years of legal proceedings and provides certainty for us and for our customers. The agreement we’ve come to is a pragmatic way to settle this matter.”

“We continue to strongly support the CCCFA Amendment Bill currently before Parliament’s Finance and Expenditure Select Committee, which will bring clarity to this confusing piece of legislation.”  

As part of the settlement, ASB makes no admission of liability or wrongdoing.

The settlement is subject to approval by the High Court.  The Court process may take several months. ASB and the plaintiffs will seek directions from the Court on the process for communicating with class members about the settlement. At this stage class members don’t need to do anything and will receive further information in due course.

ASB has previously said Banking Class Action's class definition covered all customers who had a home or personal loan with ASB between 6 June 2015 and 18 June 2019 covered by the CCCFA and who weren't provided with compliant variation disclosure.

Here's a statement from Banking Class Action.

ASB settles Banking Class Action claim for $135.6m – case against ANZ continues

The ASB plaintiffs in the Banking Class Action have reached a $135.6m settlement with ASB to resolve the ASB class members’ claims relating to alleged breaches by ASB of its disclosure obligations under the Credit Contracts and Consumer Finance Act (CCCFA).

The case against ANZ continues.

Scott Russell, the lawyer representing the ASB plaintiffs, said the settlement was reached without ASB admitting liability and is subject to court approval. The settlement would conclude over four years of court action against ASB. 

“This is a positive outcome for affected ASB customers. After four years of litigation, settlement provides certainty, avoiding what would otherwise be a very long and expensive fight through the courts. It importantly also removes the risk around the Government’s proposed retrospective law change in the CCCFA Amendment Bill.”

Russell confirmed that the case against ANZ, which also alleges disclosure breaches, will continue and ANZ is defending the claim.

“ANZ customers also deserve a positive outcome. In March 2020, ANZ admitted to the Commerce Commission that between May 2015 and May 2016 it sent Loan Variation Letters to certain customers that contained incorrect information with respect to their loan. We say that this was a breach of ANZ’s disclosure obligations and serious.

“We remain fully committed to ensuring the rights of ANZ customers are upheld and ANZ repays the borrowing costs we say it was not allowed to charge or retain during the years it was allegedly non-compliant.”

Russell said that if the ASB settlement is approved, it will leave ANZ as the only known lender facing active litigation to benefit from the Government's proposed retrospective change to the CCCFA.

“ANZ would be the sole known beneficiary of any retrospective law change. It is unclear why the Government would intervene to protect one large Australian-owned bank.

“There was never any credible rationale for changing the law in the middle of an active court case. As acknowledged by Treasury, the Banking Class Action never did and still does not pose a threat to the financial system or the funds available for lending. Changing the law now would not be in the public interest and would set a dangerous precedent – protecting a single, large Australian-owned bank.”

He added that the case against ANZ reinforces the consumer protection role of the CCCFA and encourages compliance more generally: “We consider that the provisions relied on by the plaintiffs are not just about returning borrowing costs to customers. They also play an important role in deterring future breaches and ensuring banks and other creditors are motivated to invest in proper systems to protect their customers.”

The ASB plaintiffs will seek directions from the Court on the process for communicating with potential class members about the settlement. At this stage ASB customers don’t need to do anything and will receive further information in due course.

Here's ANZ's statement.

ASB’s decision to settle is a commercial decision for them.

ANZ NZ will continue to defend its case. Our position hasn’t changed. The potential consequences under the current law are disproportionate and not aligned with any actual harm caused.

The risk posed by the wording of the current legislation has been widely discussed.

While we think the Court already has discretion to decide on consequences, the CCCFA Amendment Bill simply makes this crystal clear.

Parliament has already recognised that the CCCFA is flawed and amended the law in 2019. But it didn’t make changes for the period between 2015 and 2019. The Bill before Parliament corrects that position to make it clear that the law should be the same whether an event happened before or after 2019.

To be clear, the Bill doesn’t extinguish any consumer protections. It simply ensures the courts can decide any outcomes are proportionate, and grounded in fairness, like they do with other cases.

The Bill is not about protecting banks. The litigation funders are instead concerned the law change will prevent them from financially benefiting from unclear law.

In ANZ NZ’s case, customers who underpaid their home loans by an average of just $2 per month could, under one interpretation of the law, be refunded the entire cost of borrowing up until today’s date. This is despite there being no customer harm.

ANZ NZ has already been subject of investigation and enforcement action by the Commerce Commission in relation to the issues that are subject to the class action, after it self-reported those issues. ANZ NZ made itself accountable. ANZ NZ agreed to pay more than $35 million to affected customers, leaving them all better off than they would have been if the issue hadn’t occurred.

The case was filed in 2021 seeking refunds for some 150,000 customers.

Banking Class Action argued the two banks should refund interest and fees they were not entitled to charge due to breaches of their disclosure obligations. 

“The CCCFA is very clear. If a bank fails to comply with its disclosure obligations, it is not legally entitled to charge interest or fees on the affected loan until the failure is remedied. To the extent a bank receives interest or fees it is not entitled to, it must refund or credit those amounts to the customer as soon as practicable. In this case, the banks have continued to charge interest and fees despite not being entitled to do so. The banks’ failures to refund their customers constitute serious breaches of the provisions of the CCCFA," Russell said in 2021.

"It is estimated that approximately 150,000 customers are affected. Some of those customers may have been paying interest and fees they were not liable for over periods as long as five years."