ANZ pays millions to Crown for breaching FMCA

One of the big four Australian banks and the biggest home lender in New Zealand, the ANZ self-reported two fair dealing breaches.

The FMA investigated further and confirmed the bank breached the Financial Markets Conduct Act (FMCA) in two instances – the first for wrongly applying fees and interest to customers’ accounts for unarranged overdrafts and the second involved claiming repayment of mortgage incentives (cashbacks) previously given to customers when it should not have.

In the first breach between 20 December 2012 and 31 May 2023, when some customers went into unarranged overdraft, ANZ charged an unarranged overdraft fee, and excess interest, in circumstances where the payment was ultimately dishonoured by ANZ.

However, ANZ’s terms and conditions only allowed either the unarranged overdraft fee to be charged, or the payment to be dishonoured. 

About 209,960 ANZ customers were affected by the issue.

The total dollar value of overcharges resulting from the unarranged overdraft fee being incorrectly charged is $4,373,972, comprising refunds of $3,494,894 in fees and $879,078 in excess interest. ANZ has also paid ‘use of money’ amounts of $1,019,459. 

ANZ has made remediation payments to all current impacted customers, has made reasonable attempts to contact all former impacted customers and has paid all former customers that have claimed payments.

In the second breach, ANZ provided cash contributions to some customers when they obtained a new floating, fixed, flexible, or business home loan from ANZ, as long as they kept their banking with ANZ for the next two to three years.

ANZ sought repayment from customers when they discharged their mortgage within that time, on an assumption that the customer was moving some of their banking to a competitor in breach of the terms on which the cash contribution was made.

However, in some instances ANZ has since not been able to verify that the customer breached the agreement to keep its banking with ANZ and has therefore remediated 1,019 customers who fall within this category. 

By requesting these customers to repay the cash contribution on the basis that they had moved their banking to a competitor ANZ breached s 22(h) of the FMCA, in that they were false representations of ANZ’s right to require payment of the cash contribution.

Since self-reporting to the FMA, ANZ has introduced a new process, which requires the customer to provide a reason for discharge and clarifies that ANZ can require the customer to repay a cash contribution if the customer fails to do so.

FMA enforcement head Margot Gatland says banks are required to ensure representations they make to customers about overdraft fees and cash contributions are not misleading and do not cause harm to customers.

“ANZ made false representations in both instances,” she says.