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The Australia and New Zealand Banking Group Limited (ANZ) will pay a total of $236 million in compensation and penalties for failing to provide a number of benefits it had agreed to give certain customers.
Key points:
- ANZ failed to provide benefits such as fee waivers and interest rate discounts to about 689,000 customer accounts
- The failing impacted "Breakfree" package customers and offset account customers
- The case is the final civil matter arisen from the Financial Services Royal Commission
The Federal Court found ANZ failed to provide benefits such as fee waivers and interest rate discounts to approximately 689,000 customer accounts since the mid-1990s, with customers affected up until September 2021.
ANZ was fined $25 million and ordered to pay $211 in remuneration to customers impacted.
ANZ's Breakfree package, introduced in 2003, offered fee waivers, interest rate discounts on eligible ANZ products such as home loans, credit cards and transaction accounts and other benefits in exchange for paying an annual fee.
ANZ collected $1.9 billion in annual package fees from customers who held the Breakfree package from October 1, 2003, to September 30, 2021, according to the agreed statement of facts.
ANZ's offset customers were entitled to interest rate reductions on eligible home and commercial loans — these benefits were not always passed on to the customer.
The court found ANZ contravened the ASIC Act, the Corporations Act, and the National Consumer Credit Protection Act.
In particular, that ANZ made false or misleading representations when to certain customers when it it said that it had, and would continue to have, adequate systems and processes to provide customers with the contractual benefits they were entitled to.
In handing down the penalty decision, Justice David O'Callaghan said the nature and extent of the contraventions was such that they occurred over a substantial period of time and affected a large number of customers, leading to a significant amount of money needing to be remediated.
"There was also a significant delay in identifying impacted customers, and therefore remediating them," Justice O'Callaghan said.
"Although the nature of the acts or omissions comprising the contraventions was that of inadvertence, the conduct continued as long as it did because of inadequacies within ANZ's systems, which were compounded by inaction or ineffective action."
ANZ has also been ordered to publish an adverse publicity order on its website and online banking login page.
ANZ accepts it 'fell short of expectations'
"While the court accepted that ANZ's conduct was not deliberate, and acknowledged ANZ's cooperation during the ASIC investigation, ANZ accepts that its conduct fell short of expectations and apologises to its customers who have been impacted," ANZ said in a statement.
The bank, which will report its annual results on Thursday, said the financial impact of the remediation program and the penalty will be covered by existing provisions.
ANZ has also completed the majority of payments to customers impacted by the Breakfree package issues relating to home loans, transaction accounts and credit cards, with remaining payments expected to be made in early 2023.
The bank is planning on completing the remediation for the optional additional benefits over 2022-2023.
ASIC Deputy Chair Sarah Court said, having the necessary systems and processes to ensure customers are given the benefits they are promised is not an optional extra, it is a requirement.
"ANZ is a large financial institution that for many years failed to prioritise and deploy the systems and processes necessary to fulfil its obligations," Ms Court said.
"The penalties handed down from ASIC's Financial Services Royal Commission enforcement work should act as a reminder to financial institutions that they must invest in their systems to ensure consumers are not adversely affected or harmed."
This matter was the final civil case filed following ASIC's enforcement investigations arising from The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
More than $160 million in fines have been handed down as a result of the royal commission.
ABC/Reuters