The Auckland High Court in New Zealand has imposed a final penalty of NZ$2.1m ($1.26m) on ASB Bank for fair-dealing breaches relating to its insurance and banking services.
A media release issued by the Financial Markets Authority (FMA) of New Zealand said ASB Bank had admitted making false and/or misleading representations that resulted in financial harm to customers’ failure to correctly apply multi-policy discounts on ASB-branded insurance products, and failure to apply fee exemptions for eligible FastNet Business customers.
The first breach related to the failure to apply multi policy discounts on ASB-branded insurance products. The misapplication of the multi policy discount arose through errors in the manual process undertaken by ASB staff at the point of sale for insurance products. It also involved ASB staff misinforming customers with policies of insurance for caravans and trailers that they were eligible for the multi policy discount, despite those policies being ineligible.
The second cause of action was in respect of ASB’s failure to consistently apply fee exemptions to certain customer accounts with access to ASB’s Fastnet Banking service, specifically: Society Cheque, Education Administration, and Business Focus accounts. The failures arose through errors in the manual process undertaken by ASB staff. ASB did not have adequate systems in place to check that the fee exemptions were being applied correctly.
These resulted in more than 25,000 customers being refunded approximately NZ$4.7m by ASB. The multi policy discount issue dates back to 2009 and the Fastnet Banking issue began in 2011. However, the FMA’s claim reflects the introduction of the Financial Markets Conduct Act 2013 (FMC Act), which came into effect from April 2014.
In her judgment Justice O’Gorman said, “Where contraventions of the FMC Act are the result of process or system failures, the penalty must be set at a level that creates a strong incentive for financial institutions to maintain adequate systems and processes. The penalty needs to be at a level that clearly signals manual processes without adequate quality assurance and proactive problem detection and escalation is unacceptable.”
FMA Head of Enforcement Margot Gatland said, “This penalty reflects the seriousness of ASB’s systems failures. Customers are entitled to rely on their bank to apply discounts and fee exemptions accurately. ASB failed to detect and address these issues over many years.
“We acknowledge ASB’s cooperation, however, the duration of the failings and the delays in identifying and escalating the issues meant that a strong regulatory response was necessary.”
The FMA has acknowledged that ASB-self reported the issues and carried out remediation.