ASIC to pay $25m in penalties for undelivered customer entitlements

  • By Zilla Efrat

ANZ looks set to cough up $25 million in penalties for failing to provide promised benefits to around 580,447 customers in its transaction accounts or Breakfree package between the mid-1990s and September 2021.

This follows the commencement of civil penalty proceedings in the Federal Court by the Australian Securities and Investments Commission (ASIC) against ANZ for these contraventions. ASIC is seeking declarations, pecuniary penalties and other orders against the bank.

The proceedings primarily relate to issues raised during an ANZ case study at the Financial Services Royal Commission.

ANZ’s Breakfree package, introduced in 2003, offered fee waivers and interest rate discounts on eligible ANZ products such as home loans, credit cards and transaction accounts and other benefits in exchange for paying an annual fee. ASIC alleges that these entitlements were not always delivered to customers.

ASIC also alleges that ANZ’s offset customers were entitled to interest rate reductions on eligible home and commercial loans but, again, this was also not always delivered.

ANZ admits that it made false or misleading representations to customers that it had systems and processes in place that were adequate to provide customer account benefits. ANZ also concedes that the bank’s systems and processes were not capable of delivering those benefits consistently and that it breached its obligations as a financial services and credit licensee to provide services honestly, efficiently and fairly.

The breaches have resulted in ANZ having to remediate nearly $200 million to affected customers.

ANZ and ASIC have filed a statement of agreed facts and admissions with the court. ANZ does not intend to contest the proceeding and will join ASIC in submitting a proposed penalty of $25 million to the court.

The remediation and the proposed penalty are covered by existing provisions.

ANZ says it has enhanced its systems and processes to address the issues and is undertaking remediation programs. It says the remediation program for the offset account issues is complete.

It adds that it has paid out most customers affected by the Breakfree package issues relating to home loans, transaction accounts and credit cards. The remaining payments are expected to be made in 2022. The remediation for the optional additional benefits should be completed over 2022/23.

While ASIC has not alleged deliberate conduct, ANZ acknowledges its conduct fell short of expectations and has co-operated fully with ASIC during its investigation.

Given that these issues are now the subject of court proceedings, ANZ says it will not be making any further comment.

ASIC Deputy Chair Sarah Court says this matter marks the final investigation by ASIC arising from matters considered by the Financial Services Royal Commission.

“A constant theme of those investigations has been the failure of large financial services entities to honour agreements with customers and to ensure proper processes and systems are in place to prevent widespread compliance failures," she says. "

ASIC will continue to take enforcement action in relation to misconduct of this nature.”

The date for the first case management hearing is yet to be scheduled by the Court.