A multi-million dollar class action lawsuit has been launched against the ANZ and ASB banks over claims they failed to fully refund around 150,000 customers for fees and interest earned on loans in which there were disclosure breaches.
The case is being taken by former Commerce Commission lawyer Scott Russell and barristers Davey Salmon, QC, and Ali van Ammers, and is being jointly funded by Australian litigation funder CASL and New Zealand litigation funder LPF Group.
The claim centres around two Commerce Commission settlements with the banks in which both acknowledged a failure to provide accurate information to personal and home loan customers who varied the terms of their loans during a particular period.
In May this year ASB agreed to pay a settlement of $8.1 million to 73,000 customers after it was unable to confirm it had sent written disclosure information to those who made loan variations between June 6, 2015, and June 18, 2019.
In March last year ANZ agreed to pay $29.4m to around 100,000 customers after it confirmed it had misstated the amount of interest on loans from May 30, 2015, until May 29, 2016, as a result of a coding error within a loan calculator used by its frontline bank staff.
The lawyers allege that while the banks have made certain remediation payments to affected customers, that remediation is only a fraction of what customers are entitled to under the Credit Contracts and Consumer Finance Act 2003.
Russell said the law was 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."
Russell said in this case, the banks had 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."
ASB said it was aware of the action.
"As this matter is now before the court, we won't be making any further comment," a spokesperson said.
The Herald has requested comment from ANZ bank.
The lawyers are attempting to take an opt-out class action which means all those involved will be part of the case unless they opt out of it.
CASL managing director Stuart Price said the case was one of the most important class actions it had funded.
"It goes to the heart of the huge power imbalance that exists between banks and their individual customers, who without litigation funding would simply not have the resources to pursue legal action against ANZ and ASB for their serious failings."
He said extensive reviews into the culture and conduct of Australasian retail banks had identified significant issues and a lack of accountability.
"We hope this class action will encourage better service and respect for all bank customers, deter future breaches and improve regulatory compliance."
If the case is successful the customers would receive the amount paid by the bank, less any project costs such as legal fees and the services fee payable to the funders which would vary between 16 per cent and 23.5 per cent.
Those customers who believe they may be affected can find out more at www.bankingclassaction.com.
Bruno Bickerdike, an ASB customer who is a representative plaintiff for the case, said he previously had a mortgage with the bank of around $565,000 and varied it to get a revolving line of credit to undertake a renovation.
He had since shifted his mortgage to another funder after buying another house but he still had his personal accounts with ASB.
Bickerdike found out about the potential legal action through Russell.
"He mentioned he was working on a case involving the banks and I said I was with ASB and he said I may be affected."
Bickerdike remembers getting a notification from the bank for a $129 repayment and something to do with fees.
"I hadn't really clicked at the time that there is obviously fees and interest as well as the principal. So I just thought it was something to do with ATM fees."
He said it had been eye-opening to understand more of what was going on behind the scenes but didn't know exactly how much more the bank could owe him.
"I almost don't want to tot it up because I don't know, even if we are successful, I don't know if they will try and settle and if they are going to offer part of the amount. But with a relatively young mortgage the bulk of the monthly amount is interest, not the principal. Even if that was only 18 months that starts getting reasonably chunky."
But he said it was not really about the money.
"It is more the principle of there is no one policing the banks and their behaviour makes them think they are above the law. So there is no one to protect the little people and the banks are making obscene amounts of profits. They should be doing better."
Bickerdike encouraged others who could potentially be affected to reach out.
"I don't know if everyone did receive notification from their bank and I don't know if everyone received a payment of a token amount but I'm assuming it's a case of if you are not sure reach out and it can get checked to see if they have been affected."
Anthony Simons, another ASB customer who is also a representative plaintiff said the claim affected a previous mortgage he had with the bank which was for around $500,000.
Simons said he became aware of the claim through a business connection with the legal team.
"I went back through my bank account and spotted the amount. I didn't think anything of it. I didn't even fully understand what it was all about at the time. I vaguely remember getting something from ASB, what it was about wasn't really that clear."
He said he just trusted the bank to do the right thing.
"When I found out the extent of what it could be and what had actually happened and that it had been through the Commerce Commission and how many people had been affected and the fact the Commerce Commission had found them guilty. It made me feel a bit yuck."
Simon said it undermined the trust consumers had in the banks.
"If the money paid by customers is not the banks' to keep, then they should give it back. Not just a portion of it, but all of it."