ASIC sues ANZ for misleading customers on balances and fees

The security watchdog is suing the bank for charging its customers thousands of dollars in fees based on incorrect credit card account balances and failing to fix the problem.

ASIC alleges that the customers have continued to be mislead on the credit card balances despite the bank being aware of the problem since 2018. Picture: Asanka Ratnayake / Getty Images

The securities regulator is suing ANZ for allegedly misleading customers over the available funds in their credit card accounts, and for overcharging those customers, claiming the unlawful action is still taking place years after the lender resolved to fix the issue.

The Australian Securities and Investments Commission on Monday confirmed it had commenced civil penalty proceedings in the Federal Court against the big four bank, alleging that between 2016 and late 2018, more than 165,000 customers were slugged with cash advance fees and interest for withdrawing or transferring money from their credit card accounts based on incorrect balances.

The regulator also alleges that ANZ has not adequately fixed the problem and that customers are still being unlawfully overcharged.

“We think (ANZ) continues to be misleading and we’re seeking that the court deal with that. So we’re seeking a declaration and a pecuniary penalty, as well as an injunction order from the court that would force ANZ to fix this issue going forward,” ASIC deputy chair Sarah Court told The Australian.

“This is yet another example where customers of a major bank are being charged fees they should not have been over a number of years, again, because of a failure by the bank to fix system issues,” she added.

“This is consistent with the kinds of systemic compliance failures that we saw arising out of the Royal Commission -- legacy systems, complicated processes, outdated technology -- that are leading to customers being charged, we say, fees for things that they should not be.”

ASIC alleges that from at least May 2016, when funds were transferred into an ANZ credit card account the credit balance was indicated as available before the funds had cleared.

If the customer then transacted or transferred that money to another account, or withdrew the cash before the funds had cleared, they were charged a fee. In some cases the fees charged were in the thousands of dollars, the regulator said.

In the statement of claim filed by ASIC as part of the legal proceedings, the regulator said ANZ had known about the overcharging since “at least” June 2015, when it received complaints about the issue as well as other miscommunications on account balances.

The bank treated the complaints as “discrete issues” and failed to investigate further until the Financial Ombudsman Service warned in early 2018 of possible systemic issues, ASIC alleges.

In March of that year, an internal investigation by ANZ identified 20 scenarios where accounts were affected by the miscommunication of available funds and balances.

“We are concerned that, over a long period of time, ANZ overstated the available funds and balances on credit card accounts, and nonetheless charged fees and interest to customers who relied on this information when making withdrawals,” Ms Court said.

“In some cases, single customers were charged thousands of dollars in fees while the average cash advance fees and interest charged per affected account was $47.”

While ANZ has already remediated more than $10m to customers affected up until November 2018, ASIC says the lender’s “fix”, in place since then, has not adequately resolved the issue.

ANZ’s remedy was to update its terms and conditions and replace the wording “available funds” with “funds” on credit card accounts.

“We say ... the problem is still occurring today,” Ms Court argued. “A customer standing at an ATM and seeing their account in credit will think they can remove that amount or transfer it to another account without fees.

“ANZ should get on and fix the underlying problem in terms of the way representations are made to consumers.”

The lender has so far remediated more than 220,000 credit card accounts that were wrongly charged fees or interest up until mid November 2018.

Acknowledging the legal action, ANZ said ASIC’s claim related to “a particular situation where funds are deposited to put a credit card account into a credit balance, and a cash advance is subsequently made on the account drawing down on the credit balance before the deposit is processed”.

“ASIC is alleging historic and ongoing contraventions of the misleading or deceptive conduct provisions of the ASIC Act and of the general conduct obligations owed by credit licensees under the Credit Act, relating to the display of recently deposited funds in customer accounts,” the bank said.

“ANZ is considering the matters raised by ASIC in its concise statement. ANZ will not be providing further comment given the matter is now before the Court.”

ASIC is seeking declarations and pecuniary penalties as well as orders from the Court that require ANZ to implement a system change so that where a payment is made to a customer’s credit card account, it is not included in their funds or balance until that amount is cleared by ANZ and available to use without adverse consequences.

The date for the hearing is yet to be scheduled by the Court.