Plaintiffs in the class action against ANZ and ASB banks are prepared to resolve the four-year dispute for over $300 million.
The case involves alleged violations of credit laws impacting more than 150,000 customers from 2015 to 2019, with the banks accused of failing to provide necessary disclosures that led to excessive fees and interest charges.
The settlement offer was revealed during a Finance and Expenditure Select Committee hearing regarding proposed changes to the Credit Contracts and Consumer Finance Act (CCCFA) to address loopholes that could leave banks and other financial institutions vulnerable to legal action for past, minor breaches of the law.
“We’re making this offer to protect our clients and the country from the uncertainty the national [government] will create if it pushes these amendments through,” class action lawyer Scott Russell said.
“If passed, the amendments would apply retrospectively, specifically targeting the class action.”
“They would allow the banks to argue for reduced refunds or to erase them altogether – effectively giving them a free pass for misconduct between 2015 and 2019.”
ANZ dismisses settlement offer
ANZ dismissed the offer, describing it as a “stunt intended to influence members of Parliament.”
“The proposed settlement appears to be primarily driven by the financial interests of the litigation funders, and the proposed resolution does not reflect the nature or scale of the underlying issue,” the bank said.
“We have rejected the settlement offer, which, if we had accepted, would likely have been worth around $50 million to the litigation funders.”
“The litigation funders are worried that MPs have seen through their attempts to exploit a poorly drafted provision in the Credit Contracts and Consumer Finance Act (CCCFA) and are desperate to shut down the strong public interest arguments in favour of the amendment.”
ASB, which is also named in the class action, has not yet responded to the proposal for it to pay up to $300 million as a settlement.
“This is a very new development, and we’re not in a position to comment at this stage,” it said.
Proposed law reform sparks debate
The government is currently discussing changes to the CCCFA that, if implemented retrospectively, would allow courts to adjust payouts in liability cases against banks based on whether actual harm was caused.
The banking sector contends the changes are necessary to prevent overly harsh penalties.
Roger Beaumont, chief executive of the New Zealand Banking Association, told the select committee that from 2015 to 2019, even a minor error, such as providing a borrower with an incorrect phone number, could trigger a strict legal provision. He noted that, under one interpretation of the law, lenders in such cases might have been required to refund all fees and interest charged to the borrower until the mistake was corrected.
Meanwhile, Legal scholar James Every-Palmer raised concerns about threats to the financial system, stating, “The idea that simple disclosure failures could result in hundreds of billions of dollars being paid in free loans, that is not merely a harsh penalty. That’s a grossly disproportionate penalty, and one that creates financial stability risks.”
Lead plaintiff lawyer Davey Salmon strongly objected to the retrospective amendment, describing it as “almost unprecedented to close down rights” in an ongoing legal case.
“There is not a menace here,” Salmon said.
“The sums sought will not affect the viability or the balance sheets materially of either of the defendant banks.”
In 2020, ANZ and ASB settled with the Commerce Commission for $43 million in refunds due to disclosure lapses. Now, however, the current class action is demanding a higher settlement for the same alleged breaches.