Australia and New Zealand Banking Group (ANZ) has acknowledged breaching fair dealing laws in New Zealand and agreed to pay NZ$3.25m ($1.98m).

The settlement follows an Enforceable Undertaking related to incorrect charges on unarranged overdrafts and undisclosed terms in home loan agreements, the Financial Markets Authority (FMA) of New Zealand said. 

The issue arose between 20 December 2012 and 31 May 2023, when ANZ imposed an unarranged overdraft fee and additional interest on customers who went into unarranged overdraft, even in cases where ANZ eventually dishonoured the payment.  

ANZ’s terms and conditions permitted either the imposition of an unarranged overdraft fee or the dishonouring of the payment, not both. 

Since the Financial Markets Conduct Act (FMCA) came into effect in April 2014, a total of 209,960 ANZ customers were impacted by this issue, the FMA said.  

The incorrect charging of the unarranged overdraft fee since that period resulted in overcharges amounting to NZ$4,373,972. It includes NZ$3,494,894 in fee refunds and NZ$879,078 in excess interest.  

Additionally, ANZ has paid NZ$1,019,459 as “use of money” amounts. 

An ANZ representative, as reported by Bloomberg, stated that, in both cases highlighted by the FMA, the company had detected the problems internally and voluntarily reported them to the regulator. 

“We remain committed to doing the right thing by our customers and continuously improving how we operate,” the spokesperson said. 

ANZ has made remediation payments to all affected current customers, and the bank has made efforts to reach out to all former impacted customers, ensuring payment to those who have claimed it. 

Additionally, ANZ provided cash contributions to certain customers upon acquiring new loans, with the condition that they maintain their banking relationship with ANZ for two to three years.  

ANZ demanded repayment of this cash contribution when customers discharged their mortgage within that period, assuming they were transferring their banking to a competitor, which violated the terms of the cash contribution agreement, the FMA said 

In some cases, ANZ could not confirm that customers breached the agreement, leading to remediation for 1,019 customers in this category.  

The regulator said that by requesting repayment on the assumption that customers moved their banking to a competitor, ANZ violated section 22(h) of the FMCA, involving false representations of ANZ’s right to demand repayment of the cash contribution. 

Following a self-report to the FMA, ANZ has implemented a new process.  

FMA head of enforcement Margot Gatland said: “ANZ self-reported two fair dealing breaches to us. We have investigated further and confirmed that it breached the Financial Markets Conduct Act (FMCA) in two instances.   

“The first breach was for wrongly applying fees and interest to customers’ accounts for unarranged overdrafts. The second fair dealing breach of the FMCA by ANZ involved claiming repayment of mortgage incentives previously given to customers when it should not have.”