Court rules against ANZ in class action lawsuit

ANZ has been unsuccessful in its fight in the High Court against a class action from borrowers.

The court has awarded summary judgment against the bank in relation to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) class action proceedings.

Between 2015 and 2019, the law said that a lender that was in breach of its disclosure requirements had to repay borrowers all the interest and fees they were charged during the time when they were not compliant with the rules.

The class action claims that between 30 May, 2015 and 28 May, 2016, a coding error in one of ANZ's systems failed to take into account interest that had been accrued and not yet charged.

As a result, loan variation letters contained incorrect information. ANZ said it meant customers were undercharged by about $2 a month.

ANZ said it was considering the judgment and its potential next steps, including an appeal.

"We opposed the claim because we felt strongly that the law was not intended to operate in the way the plaintiffs and the litigation funders suggested," chief executive Antonia Watson said.

"We maintain that the potential consequences under the current law are disproportionate and not aligned with any actual harm caused."

The class action case against ANZ NZ relates to around 17,000 customers who on average underpaid their mortgages between 2015 and 2016.

ANZ NZ identified the issue itself, reported it to the Commerce Commission, and effectively wrote off the underpayments.

"ANZ NZ self-reported the issue, took accountability and paid more than $35 million to affected customers," Watson said.

"As a result, all customers were left better off than they would have been if the issue had not occurred."

Justice Geoffrey Venning noted economist Shamubeel Eaqub's evidence that the errors were economically significant, large overall and not altered by the remedial payments the bank had already made.

"A lender's failure in this respect erodes trust in the market. It diminishes the ease of comparing products, which reduces competition between lenders and results in inefficiencies. In his opinion, the plaintiffs suffered economic loss or harm by receiving a lesser quality product. A rational consumer would prefer a credit product with compliant disclosure. The fact the relevant rate was broadly consistent with market benchmarks does not establish that product attributes were competitively validated," Venning wrote in the judgment.

But Venning said what mattered was the correct interpretation and application of sections of the law.

"Under the CCCFA lenders such as ANZ must comply with the general responsibility principles, which include a requirement to assist borrowers in reaching informed decisions in all dealings in relation to a loan agreement and particularly to exercise the care diligence and skill of a responsible lender before entering an agreement to provide credit. Relevantly, in its settlement with the Commission, ANZ accepted that it had failed to act responsibly in that way.

"The affected items of information were terms of a contract which ANZ would have sought to enforce if necessary. The affected items of information included the changed regular repayment amounts, which was the item of information likely to be of most importance to the plaintiffs and which needed to be accurate to ensure they were able to comply with their obligations under the contract to repay the loan in full at the end of the term. The plaintiffs were not in a position to calculate this themselves. The affected items of information, particularly repayments, were incorrect by material margins. As a result of the error, a sum of accrued interest ($801.82) was left out of the calculation. The repayment amount of $2.34 was not a mere rounding error. Over the term of the loan it amounted to a sum which could not be described as de minimis."

The High Court found that ANZ breached section 22 of the CCCFA and that the representative plaintiffs were not liable for costs of borrowing on their loan for the period of breach and has directed ANZ to refund them $32,728.42.

ANZ NZ is considering how this judgment may apply to other members of the class.

ANZ NZ's estimate of its maximum potential liability for costs of borrowing arising from this decision is approximately NZD$125 million.

Earlier, ASB agreed to pay $135.6m to settle a class action against it for similar breaches.

The Finance and Expenditure Select Committee has recommended changes to the law that confirm the court's ability to make orders that are just and equitable in relation to costs of borrowing between 2015 and 2019 where lenders breached their disclosure obligations.

In 2019, the law was amended to apply to breaches from that point, but this change would apply to breaches before that time, too, if they had not been dealt with by a court already.

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