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The Australian Securities and Investments Commission (ASIC) has advised ANZ that it intends to commence civil penalty proceedings against the bank in relation to the charging of fees for periodical payments in certain circumstances prior to February 2016.
ASIC has alleged that between August 2003 and February 2016, ANZ wrongly charged transaction fees and non-payment fees for periodical payments between accounts in the same name.
According to the regulator, transaction fees were charged when a periodical payment was successful, and non-payment fees were charged when a periodical payment could not be made due to insufficient funds in the customer’s account.
ASIC has contended that ANZ first became aware there was a risk the bank was not entitled to charge these fees in July 2011. However, ASIC will now claim that ANZ:
- provide written notification of the existence of a possible issue in relation to the fees to ASIC until 14 February 2014;
- commence notifying affected customers about the issue until at least 23 September 2015;
- change its terms and conditions to permit the charging of the fees until 23 February 2016; and
- commence making remediation payments in relation to the unlawfully charged fees until August 2016.
“At the heart of ASIC’s action is the fact that ANZ continued to charge the fees during the 2003-2016 period, despite what ANZ already knew,” the regulator has stated.
ANZ first reported the matter to ASIC in February 2014. However, in September 2018, the bank informed ASIC that the information it had previously provided to the regulator was incomplete.
As a result of the new information, ASIC commenced an investigation into ANZ in October 2018.
ASIC will allege that ANZ breached section 912A(1)(a) and (c) of the Corporations Act 2001, which requires a licensee to ensure that the financial services covered by its licence are provided efficiently, honestly and fairly and to comply with financial services laws because ANZ provided “incomplete or misleading” information when it initially reported the matter.
Further, ASIC will allege that ANZ breached the Australian Securities and Investments Commission Act 2001 (ASIC Act), including that ANZ engaged in “misleading or deceptive conduct”, made “false or misleading representations” and engaged in “unconscionable conduct”, because it:
- continued to charge the fees when it knew that the fees were unlawful or were at risk of being unlawful;
- knew that it was highly unlikely that it would be able to remediate all affected customers;
- failed to inform customers who may have been affected by its unlawful charging until September 2015; and
- deliberately did not make remediation payments to customers who had been charged the fees between August 2003 to 31 December 2007.
The ASIC Act contraventions attract a maximum pecuniary penalty of between $1.7 million and $2.1 million per contravention, which, according to ASIC’s estimates, would take the total gross loss to customers during the aforementioned period to over $50 million.
ASIC has told ANZ that it will seek pecuniary penalties in respect of 1.3 million occasions where the fees were applied.
ANZ has claimed that it has already provided for approximately $50 million in customer remediation payments in relation to the matter, in which more than $28 million has been paid to customers impacted since 2008.
The major bank has denied any deliberate wrongdoing and intends to “vigorously defend” such allegations.
The Australian Government Solicitor has informed ANZ it will file documents in the Federal Court on 29 July.
The breaches were the subject of a class action that was settled in December 2018 for $1.5 million, pending court approval.
[Related: APRA calls out banks for ‘improper reporting’]
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