ASB to pay $8.1m to customers for responsible lending failures after ComCom investigation and settlement

Thousands of ASB customers will be compensated for responsible lending failures. Photo / File

ASB is repaying $8.1 million to customers after admitting lending failures in a settlement with New Zealand's consumer watchdog.

The bank reached the deal with the Commerce Commission, following an investigation, accepting it failed to ensure its systems and processes were sufficient so required information was disclosed to more than 73,000 home and personal loan customers.

According to the settlement, seen by the Herald after it was publicly released today, ASB will repay $8,123,304 to those affected by the breach of its lender responsibilities under the Credit Contracts and Consumer Finance Act (CCCF Act).

Self-reported in September 2019, the error occurred when the bank's standard operating procedure wasn't consistently followed for customers making changes to the relevant repayment date, amount and frequency of their existing loan agreements either in a branch or over the phone.

ASB advised the Commission it had implemented a new procedure in June 2015 which allowed staff - in a branch and in its call centre - to make changes to the relevant repayment date, amount and frequency of personal and home loans upon request by the customer, the settlement reads.

"According to the standard operating procedure, upon action ing such a request frontline staff were required to prepare and issue the customer with the relevant variation disclosure as required under the CCCFA," it reads.

Upon review, however, ASB discovered it could not confirm the process were followed consistently and some customers weren't given proper disclosure.

In a statement this afternoon, Commission chair Anna Rawlings said lenders must exercise the care, diligence and skill of a responsible lender in all their dealings with borrowers.

"In this case ASB's responsible lending failures had the potential to affect a large number of borrowers entitled to receive key information when they made changes to their loans, including information about how the change impacted their overall obligations under their loans," she said.

"Lenders need not only to make sure that they understand their obligations under the CCCF Act, but also that they have robust internal processes in place to meet those obligations."

Emails sent by ASB to affected customers recently also apologised for the breach and notified them of a payment of $68 or $135, depending on when they entered into a loan contract.

According to the settlement, 26,088 customers will receive $68 and 47,032 will be compensated $135.

Rawlings signed the agreement, dated February 23, for the Commission but the person who signed on behalf of ASB had their name redacted in the publicly released document.

ASB said in a statement the bank was reaching out to customers who requested a change to their loan during the period the breach occurred to apologise.

"This payment does not represent any actual financial loss by the customers but is an acknowledgement we may not have provided written confirmation of the requested changes.

"ASB takes its responsibilities under the Credit Contracts and Consumer Finance Act very seriously and sincerely regrets this has occurred."

The bank advised the Commission it has updated its policies, process and procedures to ensure all customers who request a change in their repayment date, amount or frequency receive the required variation disclosure, the settlement reads.