ASIC confirms that it has now commenced proceedings in the Federal Court against Australia and New Zealand Banking Group Limited (ANZ). In these proceedings, ASIC will allege ANZ was not entitled to charge certain periodic payment fees under the Bank’s contracts with its customers.
At the relevant time, ASIC says that ANZ’s contract terms and conditions defined a periodical payment as a debit from an ANZ account which the customer instructed ANZ to make to the account of another person or business. The definition of a periodical payment excluded payments between two accounts in the name of the same person or business. Between August 2003 and 23 February 2016 (the 2003-2016 Period), ASIC alleges that ANZ wrongly charged transaction fees and non-payment fees for periodical payments between accounts in the same name. Transaction fees were charged when a periodical payment was successful, and non-payment fees were charged when a periodical payment could not be made due to insufficient funds in the customer’s account.
During the 2003-2016 Period the transaction fee for periodical payments varied between $1.70 and $4 for business accounts and was either $4 or free for retail accounts. And the non-payment fee for periodical payments varied between $35 and $45 for business accounts and was between $6 and $45 for retail accounts.
ASIC alleges that between 26 July 2013 and 23 February 2016, ANZ unlawfully charged the fees on at least 1,340,087 occasions.
ASIC contends that ANZ first became aware there was a risk the bank was not entitled to charge these fees in July 2011. Despite this, ASIC will say that ANZ did not:
- provide written notification of the existence of a possible issue in relation to the fees to ASIC until 14 February 2014;
- commence notifying affected customers about the issue until at least 23 September 2015;
- change its terms and conditions to permit the charging of the fees until 23 February 2016; and
- commence making remediation payments in relation to the unlawfully charged fees until August 2016.
At the heart of ASIC’s action is the fact that ANZ continued to charge the fees during the 2003-2016 Period, despite what ANZ already knew.
ANZ first reported the matter to ASIC in February 2014 (16-291MR).
In September 2018, ANZ contacted ASIC advising that information they had previously provided to ASIC relating to ANZ’s identification of the issue was incomplete. As a result of the new information, ASIC commenced an investigation into ANZ in October 2018.
ASIC alleges ANZ breached section 912A(1)(a) and (c) the Corporations Act 2001 (Corporations Act) which requires a licensee to ensure that the financial services covered by its licence are provided efficiently, honestly and fairly and to comply with financial services laws because it amongst other things, provided incomplete or misleading information when it reported the issue to ASIC in February 2014.
ASIC further alleges breaches by ANZ of the Australian Securities and Investments Commission Act 2001 (ASIC Act), including that ANZ engaged in misleading or deceptive conduct, made false or misleading representations and engaged in unconscionable conduct because the bank:
- continued to charge the fees when it knew that the fees were unlawful or were at risk of being unlawful;
- knew that it was highly unlikely that it would be able to remediate all affected customers;
- failed to inform customers who may have been affected by its unlawful charging until September 2015; and
- deliberately did not make remediation payments to customers who had been charged the fees between August 2003 to 31 December 2007.
The ASIC Act contraventions attract a maximum pecuniary penalty of between $1.7 million and $2.1 million per contravention.
ASIC estimates that the total gross loss to customers during the period 1 January 2008 to 23 February 2016 is in excess of $50 million. ANZ has paid approximately $28 million in remediation to customers to date. However, ANZ has not paid remediation to customers who have been charged the fees prior to 31 December 2007.
The proceeding will be listed for directions on a date to be determined by the Court.
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Editor's note:
The matter has been listed before Chief Justice Allsop at 9:15am on 15 August 2019, in Brisbane, for a preliminary case management hearing.
Editor's note 2:
On 15 August 2019, the matter was heard before Chief Justice Allsop in the Federal Court in Brisbane for a preliminary case management hearing. The Chief Justice ordered that there be a separate liability hearing before any penalty hearing, and that the next case management hearing be heard at a date to be fixed in consultation with his associate around 8 November 2019.
Editor's note 3:
The matter has been listed for a case management hearing before Chief Justice Allsop in the Federal Court in Melbourne on Wednesday 4 December 2019.
Editor's note 4:
On 4 December 2019, a case management hearing was held before Chief Justice Allsop. The matter was listed for a pre-trial case management hearing on 3 August 2020. A trial has been listed to commence on 14 September 2020.
Editor’s note 5:
On 17 July 2020, Chief Justice Allsop ruled on an interlocutory application made by ASIC for ANZ to give discovery of documents which record the contents of, or the passing-on of the substance of legal advice ANZ received in July 2011 relating to periodic payment fees charged between accounts in the same name (July 2011 Advice). Allsop CJ found against ASIC concluding that, contrary to ASIC’s submissions, ANZ had not waived legal professional privilege over the July 2011 Advice. Download a copy of the decision.
Editor's note 6:
On 31 July 2020, the pre-trial case management hearing set down for 3
August 2020 was rescheduled to 17 August 2020.
Editor's note 7:
On 17 August 2020, the pre-trial hearing listed for 17 August 2020 was
vacated.
Editor's note 8:
On 11 September 2020, the Court ordered that the hearing listed for
14 to 18 September 2020 and 21 September 2020 be vacated, and that the matter be listed for hearing on 22 September 2020.
Editor's note 9:
On 21 September 2020, the Court ordered that the hearing listed for 22
September 2020 be vacated, and that the matter be listed for hearing on 1 October 2020.