The government will keep amending the law to avoid lenders facing excessively severe penalties for providing customers with incorrect loan information during the mid-2010s.
However, it has confirmed that lenders already involved in court cases over disclosure breaches will not benefit from these changes.
The government will add a carve-out in its amendment to the Credit Contracts and Consumer Finance Act (CCCFA). Active litigation cases will be excluded from any relief measures being introduced.
This approach allows the large class action against ANZ to proceed unchanged.
ASB, also involved in the class action, agreed earlier this month to a “pragmatic” payment of $135.6 million to settle its case.
Under current law, lenders who breached their disclosure obligations between 2015 and 2019 are required to repay affected customers all interest costs and fees for the entire breach period, regardless of how serious the breach was.
The government was concerned that lenders might face crippling penalties for minor errors, so it aimed to grant courts the discretion to impose fair penalties, similar to the authority they have for breaches occurring after 2019.
But the government has faced strong criticism for appearing to intervene in support of ANZ and ASB, both involved in a class action that could have collectively cost them hundreds of millions of dollars.
Following the Parliament’s Finance and Expenditure Committee’s advice, the government will amend the law to address industry concerns while refraining from intervening in ongoing legal cases.
“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.”
While ANZ New Zealand chief executive Antonia Watson backed the change, she also said it was unfair for the case against ANZ to be excluded.
“Whatever happened to the fundamental legal principle that everyone should be treated equally before the law?”she said.
ANZ stated that errors made between 2015 and 2019 impacted 17,000 customers, who on average underpaid by $2 a month. The bank highlighted that it reported the issue to the Commerce Commission and compensated customers with $35 million, “leaving them all better off than if the issue had never occurred.”
Meanwhile, Scott Russell, the lawyer representing the customers, welcomed the decision that the law change would not affect the court case. He said this safeguarded consumers’ rights to have their claims decided by the courts based on the law in effect at the time of the events.