The Financial Markets Authority (FMA) is taking ANZ New Zealand to the High Court alleging the country's biggest bank charged some customers for credit card repayment insurance policies that offered those customers no cover.
The FMA says the civil proceedings have two causes of action. Firstly, that ANZ issued duplicate credit card repayment insurance policies to some customers that provided no additional benefits or cover, and charged premiums on those policies, between April 2014 and November 2019. And secondly, ANZ issued and failed to cancel credit card repayment insurance policies for ineligible customers, also charging premiums on those policies, between April 2014 and May 2018.
Credit card repayment insurance is a form of insurance that covers some or all of a customer’s outstanding credit card repayments in circumstances such as in the event of a customer’s bankruptcy, redundancy, injury, illness or death. ANZ says it's sorry, has paid compensation to customers of $440,000, and the FMA’s proceedings relate to 307 customers.
ANZ failed to disclose the issue during FMA & RBNZ's conduct and culture review
The FMA says the two issues date back to at least 2001, but its claim only covers the period since the introduction of the Financial Markets Conduct Act in April 2014.
"The FMA claims that ANZ contravened section 22 of the Financial Markets Conduct Act by making false and misleading representations about the cover of the policies. The regulator is seeking declarations of contravention of the Financial Markets Conduct Act, pecuniary penalties and costs," the FMA says.
"ANZ first identified the duplicate policy issue around September 2017 and the ineligible customers issue was identified around May 2018. ANZ did not disclose either issue to the FMA or Reserve Bank during their joint conduct and culture review of New Zealand’s retail banks from May to June 2018. The review requested that ANZ disclose 'any work underway to remediate any identified issues where conduct by your firm has resulted in detrimental outcomes for customers',” the FMA says.
According to the FMA, ANZ first notified it of both issues in June 2019.
“While ANZ has embarked on their own remediation programme, and ultimately self-reported this matter, the case points to a failure of internal systems and controls resulting in customer harm over a significant period of time. Self-reporting is expected, and is taken into account by the FMA when determining the appropriate regulatory outcome. In this instance, we felt it appropriate to put the matter before the courts," FMA general counsel, Nick Kynoch says.
“ANZ sold a product that, for some customers, offered no benefit.”
'We’re very sorry'
For its part ANZ says it identified the issues, reported them to the FMA in June 2019, and has compensated affected customers to the tune of $440,000. ANZ says it no longer sells credit card repayment insurance.
"ANZ however acknowledges that it took too long to report the issues to the FMA, and will engage with the FMA on its reporting framework over the coming weeks," the bank says.
"ANZ identified 390 customers had more than one credit card repayment insurance policy for their credit card. Those customers only needed one policy as it gave the same cover. ANZ also identified a further 439 customers who were ineligible to claim the insurance. The FMA’s proceedings relate to 307 of those customers, with policies between April 2014 and September 2019."
"ANZ has since contacted all affected customers to apologise and compensate them for the issues which were unintentional and caused by human error and systems issues," the bank says.
“We’re very sorry this happened. We actively review our processes and systems to try and identify issues that could impact our customers. Where we find problems, we work to fix them for our customers,” says ANZ managing director of retail and business banking Ben Kelleher.