ASB heads to Court of Appeal over class action lawsuit

In a 2022 High Court ruling, Justice Geoffrey Venning agreed that representatives of both ASB and ANZ customers were able to bring class action cases against the banks on an “opt-out” basis. Photo / Michael Craig

ASB was in the Court of Appeal on Tuesday, in a bid to prevent a class action lawsuit against both it and ANZ Bank NZ from covering all affected customers whether they ask to be covered or not.

The main case, which is yet to go to trial, centres on claimed breaches of the Credit Contracts and Consumer Finance Act 2003 (CCCFA) by the banks when changing the conditions of their consumer loans.

In a High Court ruling on July 29, 2022, Justice Geoffrey Venning agreed that representatives of both ASB and ANZ customers were able to bring class action cases against the banks on an “opt-out” basis.

That means that all the two banks’ affected customers are covered by the lawsuit, unless they go to the trouble of formally opting out of it.

However, the High Court dismissed the customers’ bid for common fund orders (CFOs), at least for now, describing any such order as “premature”.

That would have allowed entities funding the legal action to take a percentage of any amounts awarded from everyone who received a payout, even those bank customers who didn’t explicitly agree to the CFO.

Both sides are appealing aspects of Justice Venning’s ruling. The plaintiffs for both banks’ customers are appealing the CFO ruling. ASB is appealing the opt-out ruling.

Costs of borrowing

The case revolves around incorrect information the banks supplied to consumer loan customers when making changes to loan agreements. The customers claim the banks therefore breached the CCCFA.

The banks had admitted to the Commerce Commission violation of lender responsibility rules. However, the plaintiffs claim the banks failed to properly disclose changes to loan agreements, which is laid out in another section of the act.

On top of that, the act states that debtors aren’t liable for the “costs of borrowing” during any period where the banks didn’t comply with loan variation disclosure rules. That would potentially include all interest payments made to the ANZ between May 30, 2015, and May 28, 2016, when an automatic calculator incorrectly calculated interest information.

That wrong information was sent in loan variation letters to ANZ’s customers.

The case against the ASB is that it didn’t consistently follow its standard operating procedure for loan variation disclosure under certain circumstances between June 6, 2015, and June 18, 2019.

Both banks deny breaching the act’s rules on disclosing variations to loans and are also pleading a “reasonable mistake” defence under another section of the act.

Losses disputed

The lawyer for ASB, Jack Hodder, KC, questioned what further losses had been incurred by ASB customers. The customers were effectively saying it would be nice to have interest-free loans, he said.

If the case proceeded on an opt-out basis, ASB was concerned it couldn’t identify everyone affected or by how much. If the class action was conducted on an opt-in basis, the bank would know exactly who was affected.

The High Court had stated that although it might be difficult for ASB to identify affected customers, it would not be impossible. Hodder questioned that, although he agreed when questioned by Justice Jillian Mallon that it would be hard but not impossible.

An opt-out class action lawsuit also created issues with customer privacy. “All those things add up and create more problems.”

He was also opposed to the High Court’s splitting-up of the future hearing into different parts, which would result in a piecemeal approach. The core issue was whether the banks had breached section 22 of the CCCFA on disclosing loan variations, but that breach wouldn’t be looked at until a later stage of the court case.

Lawyer for the representative ASB customers, Davey Salmon, KC, said an opt-out case would play into the banks’ hands because customers in cases like this would not opt-in.

He said the part of the CCCFA that said debtors weren’t liable for the costs of borrowing if the lender wasn’t fully complying with loan variation disclosure was seen by the banks as a remarkable provision.

“It is one that banks have lobbied to change because it means what it says.”

The appeal hearing is ongoing before Justices Mallon, Brendan Brown and Patricia Courtney.