Government progresses controversial law change that will benefit banks - except for ANZ, as it goes to court

ANZ declined to settle with plaintiffs in a class action, as ASB did earlier this month. Photo / RNZ

The Government will continue changing the law to prevent lenders from being hit with disproportionately hard penalties for giving their customers the incorrect information about their loans in the mid-2010s.

However, it has decided lenders that are already before the courts for disclosure breaches won’t be given relief.

The Government will include a carve-out in its amendment to the Credit Contracts and Consumer Finance Act (CCCFA) that exempts active litigation.

This way, a large class action against ANZ will progress as is, with the bank saying it remained “confident” of its position.

ASB, which was also subject to the class action, earlier this month agreed to a “pragmatic” payment of $135.6 million to settle its case, but didn’t admit to doing anything wrong.

Under the existing law, the default penalty for lenders that breached their disclosure obligations between 2015 and 2019 is for them to reimburse affected customers all their interest costs and fees for the duration of the breach – regardless of its severity.

The Government was worried this could see lenders face crippling penalties for inconsequential mistakes, so sought to give the court discretion to issue fair penalties – as it is empowered to do for breaches that occurred after 2019.

However, it faced fierce criticism for seemingly swooping in to the rescue of ANZ and ASB, which were subject to a class action that could have collectively cost them hundreds of millions of dollars.

Further to advice from Parliament’s Finance and Expenditure Committee, the Government will now take a middle-of-the-road approach.

It will change the law to appease the industry, while avoiding intervening in active litigation.

“While retrospective law change is unusual, in this case I believe it is justified,” Commerce and Consumer Affairs Minister Scott Simpson said.

“The intent has always been to fix bad law and ensure the courts have the discretion to reach fair and equitable outcomes.”

ANZ New Zealand chief executive Antonia Watson supported the change, but said it was unfair for the case against ANZ to be exempt.

“It sets a poor precedent to exclude a claim against one entity from legislative amendments,” she said.

“Whatever happened to the fundamental legal principle that everyone should be treated equally before the law?”

ANZ argued the errors it made between 2015 and 2019 affected 17,000 customers, who on average ended up underpaying $2 a month.

It noted it reported the issue to the Commerce Commission and paid customers $35m, “leaving them all better off than they would have been if the issue hadn’t occurred”.

ANZ said it disagreed with the plaintiffs’ interpretation of the law and looked forward to having the matter determined by the court.

The lawyer representing the customers, Scott Russell, was pleased the law change wouldn’t apply to the court case.

He said this preserved the rights of consumers to have their claims determined by the courts under the law as it stood when the relevant events occurred.

The case is due to be heard in the High Court in March.

Changes to the CCCFA will be made once the Credit Contracts and Consumer Finance Amendment Bill passes its second and third readings in Parliament.

Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.

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