ANZ Reaches $3.25 Million Settlement Over Fee and Incentive Breaches

ANZ Bank New Zealand has agreed to pay $3.25 million to settle charges brought by the Financial Markets Authority (FMA) after admitting to misleading practices involving overdraft fees and mortgage incentives. The breaches, which extended across more than a decade, affected hundreds of thousands of customers.

The first case involved overdraft fees charged between December 2012 and May 2023. ANZ collected both overdraft fees and excess interest when customers' accounts went into unarranged overdraft, even when the transactions were rejected. The practice was inconsistent with the bank's own terms and conditions, which allowed only one of the charges to apply. According to the FMA, more than 209,000 customers were impacted, with fees totaling $4.37 million.

FMA Head of Enforcement Margot Gatland stated, "ANZ's terms and conditions only allowed either the unarranged overdraft fee to be charged, or the payment to be dishonored." She stressed that banks must ensure clarity in their representations and avoid misleading customers.

The second issue related to mortgage incentives. ANZ had offered cash contributions to new home loan customers on the condition they maintain their banking with the institution for a set period, usually two to three years. When some borrowers discharged their mortgages early, ANZ assumed they had switched to competitors and demanded repayment of the incentives. However, in 1,019 cases between 2014 and 2022, the bank could not verify that customers had breached the agreement.

Those customers received refunds totaling $2.43 million, alongside $582,030 in compensatory payments. ANZ has since revised its mortgage discharge processes, requiring clearer documentation of customer intentions and specifying when repayment of incentives is necessary.

The FMA highlighted that ANZ discovered both problems internally and reported them to regulators, a move that contributed to the settlement outcome. The $3.25 million payment is divided between $2.08 million for overdraft-related breaches and $1.17 million for the mortgage issue.

This is not the first time ANZ has faced scrutiny over similar matters. In Australia, the bank paid a $15 million penalty two years ago following a comparable case investigated by the Australian Securities and Investments Commission (ASIC).

In addition to paying refunds and settlement costs, ANZ has committed to improving internal policies and monitoring systems to prevent recurrence. "It is essential that customers can continue to have confidence in their bank," Gatland said, adding that the FMA will continue to act against misleading practices to safeguard trust in New Zealand's financial markets.