Corporate regulator also claims the bank misled it about compensation for hundreds of thousands of customers

This article is more than 1 year old

This article is more than 1 year old

ANZ was warned that charging customers to move money between their own accounts could be illegal in July 2011, but continued levying the fees for another four and a half years, the corporate regulator has told a court.

The Australian Securities and Investments Commission has also accused ANZ of knowingly misleading it by giving the impression it had only recently become aware of the problem when it told the regulator about it in February 2014, when the bank had allegedly known it should not have been charging the fees since July 2011.

On Thursday, the Australian Securities and Investments Commission launched legal action against ANZ over the fees that could cost the bank tens or hundreds of millions of dollars in civil penalties if the regulator succeeds.

Corporate watchdog Asic to sue ANZ over alleged transfer fee rip-off Read more

In documents filed with the federal court, Asic accuses ANZ of breaking laws against engaging in misleading or deceptive conduct, unconscionable conduct and making false or misleading statements on each of “at least” 1.3m occasions when it charged the fees between 26 July 2013 and 23 February 2016.

However, the regulator said the breaches over which it has taken legal action were part of a pattern of behaviour dating back to August 2003.

“Since 1 January 2008 alone, the fees were incorrectly applied to over 460,000 customers on approximately 3 million occasions,” the regulator said in a concise statement filed with the court.

Asic claims ANZ’s contracts with its customers did not allow it to charge two sets of fees – one for making regular payments from one account to another, and another “dishonour” fee if there was not enough money in the first account to complete the transfer.

It told the court ANZ became aware the fees might be against the law due to a review conducted by law firm Blake Dawson (now Ashurst) as part of its defence to a broader class action lawsuit launched by Maurice Blackburn in September 2010.

While the class action was largely unsuccessful, the periodical payment fees were carved out and in December last year ANZ agreed to pay $1.5m to settle the case.

On 18 July 2011, Blake Dawson “indicated” that ANZ should investigate its entitlement to charge these fees” and added them to a “wrinkle list” of potential problems, Asic said.

Asic said that between 2012 and 2013 ANZ considered dealing with the problem by amending its standard terms and conditions to allow the fees “but did not ultimately make the amendments”.

“Furthermore, ANZ did not take any steps to disclose the existence of a possible issue in relation to the fee to Asic until 31 January 2014, and did not cease charging the fee.

“The conduct ceased due to ANZ’s amendment of its standard terms which did not become effective for all customers until 23 February 2016.”

Asic said ANZ reported the fees to it as “an issue” in a notification letter sent on 14 February 2014.

In the letter, ANZ said it had “recently been asserted” that it was not entitled to charge the dishonour fee and promised to “remediate impacted accounts as required,” Asic said.

“The overall impression created by the notification letter was that ANZ had only recently become aware of the issue described in that letter in relation to the charging of the [dishonour fee],” Asic told the court.

“That impression was, to ANZ’s knowledge, misleading.

“ANZ did not take any steps to correct that impression until 31 August 2018 when it disclosed the existence of the 2011 information [from Blake Dawson] to Asic.”

Asic claims the statement that customers would be remediated was also misleading because the bank has a policy not to pay compensation for breaches related to transactions that are more than six years old.

The breaches alleged by Asic carry maximum penalties of between $1.7m and $2.1m per contravention, implying a total penalty for the bank of in excess of $2tn if Asic succeeds.

However, a court is unlikely to apply the maximum possible penalty, meaning a total running into the tens or hundreds of millions is far more likely.

Asic also accuses ANZ of breaching its core obligations under its financial services licences to deal with customers “efficiently, honestly and fairly”.

However, it has not been able to ask the court for a fine to be imposed for this alleged breach because the fees were charged before changes to the law in February that beefed up penalties.

“While ANZ is still considering the matters raised by ASIC, ANZ categorically denies any deliberate wrongdoing and intends to vigorously defend any such allegation,” the bank told the ASX on Thursday.

In September 2016 ANZ struck a deal with Asic to pay almost 400,000 customers $28.8m to compensate them for paying the fees.

On Thursday morning the bank told the market the compensation figure had now blown out to $50m.