A sweeping legal amendment passed its first reading in Parliament last week, setting off a firestorm of controversy over whether the Government is rewriting the rules mid-litigation to shield major banks from financial accountability. Critics are calling the move an extraordinary and dangerous precedent—one that could let ANZ and ASB Bank escape hundreds of millions of dollars in refunds to customers harmed by years of regulatory non-compliance.
Disclosure Failures Spark Legal Action
The origins of the dispute date back to a Commerce Commission investigation, which revealed that ANZ and ASB had failed to properly disclose key information to borrowers under the Credit Contracts and Consumer Finance Act (CCCFA). The breach, which reportedly affected around 170,000 customers, led to significant overcharges in interest and fees. The affected consumers, many of them homeowners and small business operators, launched a class action in 2021 seeking redress.
“It’s simple stuff,” said Scott Russell, the lawyer representing the plaintiffs. “It’s disclosure rules that allow ordinary New Zealanders to understand their financial position.”
The class action achieved certification and was awaiting a crucial summary judgment when the Government announced its intent to change the law, retroactively.
A Legal U-Turn with Broad Consequences
The proposed amendment to the CCCFA would fundamentally alter the consequences for historic disclosure breaches. Specifically, it would revoke section 99(1A), which automatically stripped lenders of their right to charge borrowing costs when they failed to meet disclosure obligations. In its place, courts would be given discretion to determine what constitutes a “just and equitable” outcome, considering factors such as the seriousness of the breach and the presence of a compliance programme.
Critically, the new discretion would apply retrospectively to contracts entered into as far back as June 6, 2015, including the contracts at the heart of the current class action.
Commerce and Consumer Affairs Minister Scott Simpson defended the change, arguing that the existing regime was overly punitive and that banks are “surely entitled to the same judicial fairness as any other entity or person.”
But opponents argue the timing and targeted nature of the amendment paint a different picture.
Rule of Law and Retrospective Legislation
Russell said the amendment represents “unprecedented political interference with the judicial process,” effectively changing the rules just as the case was nearing a decision. “This proposed amendment is a direct attack on the rights of everyday New Zealanders,” he added, accusing the Government of siding with powerful, Australian-owned financial institutions over its own citizens.
Legal scholars and consumer advocates are also raising red flags. Retrospective legislation, they argue, undermines legal certainty and violates democratic norms.
A Cabinet paper released by Minister Simpson acknowledged that retrospective changes would attract criticism but maintained that the previous penalty regime had not functioned as intended.
Who Wins, Who Loses?
Both ANZ and ASB have stated that the new law would not stop the current class action or prevent similar cases in the future. “They will simply confirm that when considering these cases, the court has discretion to decide what a fair outcome should be. This change does not remove the rights and protections of consumers,” a spokesperson for ANZ said.
But critics argue the changes amount to a backdoor bailout. “The banks themselves have admitted this case poses no material risk to them,” Russell pointed out, “yet they’ve clearly lobbied successfully behind closed doors for legislation that could deny hundreds of thousands of Kiwis their rightful compensation.”
Political opponents have seized on the issue. All three coalition parties supported the bill at its first reading, though New Zealand First expressed reservations about its retrospective scope. The bill now heads to a select committee for further scrutiny, where it is expected to face robust public and professional opposition.