ANZ to pay $57.5m to settle ‘interest-free’ credit card class action

ANZ will pay $57.5m to settle a class action after it was accused of incorrectly slugging some customers interest rate charges over a nine-year period.

The Melbourne-based bank will settle the latest of a string of legal action related to its credit card products.

ANZ will pay a financial settlement to close off another lingering legal matter tied to the bank’s credit cards, agreeing to pay $57.5m after charging borrowers for spending that should have been interest free.

In a market update on Monday, ANZ said it was paying to settle the case, which has dragged through the courts since it was lodged by Phi Finney McDonald over allegations the bank’s credit cards were wrongly charging customers.

The deal, still to be approved by a judge, will see ANZ settle the case without any admission of liability for charges the bank levied on its customers over a nine year period.

Phi Finney McDonald alleged ANZ harmed its customers by charging them the full interest costs on credit card balances they had repaid in a timely manner.

This saw the bank tell customers they could repay as much or as little of the balance of their credit cards, without warning them that if they failed to repay the full amount they would be charged interest against the full balance borrowed.

This saw many customers slugged interest charges, despite making attempts to repay their credit card balances.

Phil Finney McDonald alleged ANZ did not tell cardholders who to calculate their potential interest charges and obfuscated the mechanisms that were used to calculate charges. These “interest-free” credit card products were deemed illegal in January 2021.

The settlement must still be approved by the Federal Court, with Justice Jonathan Beach slated to hear the matter in August.

However, the final settlement could be some months later given delays in formalising the deal.

This will see the court approve any disbursement of the settlement to class action members, Phi Finney McDonald and the case’s backers Woodsford Litigation Funding.

ANZ said the costs to settle the matter had already been provisioned by the bank in September, the same time the bank moved to close off another matter relating to its credit cards with the corporate regulator.

Phi Finney McDonald principal lawyer Brett Spiegel said the proposed settlement was an “excellent outcome for group members”.

However, Mr Finney declined to reveal if ANZ had been in negotiations to settle the matter in September last year.

ANZ also settled its case with the Australian Securities and Investments Commission in September, after the regulator took aim at the bank over its credit card fees and interest.

This saw ANZ pay a $15m penalty and agree to further remediation to customers who were affected by the alleged contraventions of the National Consumer Credit Protection Act between April 2019 and September 2021.

ASIC noted ANZ had repaid customers an average of $45 per person in remediation for the excess fees and interest.

This has seen the bank repay at least $8.3m to approximately 186,000 accounts charged the excess fees.

The credit card settlement comes after ANZ also paid $47m to settle a class action by Slater and Gordon over the bank’s credit card insurance.

This saw the bank hit with legal action over claims it engaged in unconscionable conduct and engaged in misleading and deceptive conduct in relation to the sale of its policies to customers.

ANZ shares closed up 0.38 per cent at $29.15.