ANZ blames systems, human error for NZ insurance failures

ANZ has become the second Australian major bank this week to blame systems issues and human error for a regulatory scandal.

ANZ has fallen foul of regulators in New Zealand over credit card insurance. Picture: Hollie Adams

ANZ has become the second Australian major bank this week to blame systems issues and human error for a regulatory scandal, after New Zealand’s Financial Markets Authority filed High Court action against the bank over its poor handling of credit card insurance.

In a statement issued on Friday, the FMA alleges ANZ in New Zealand incorrectly charged some customers twice for credit card insurance and made false and misleading representations.

The FMA said it was taking the matter to court over two key issues, after an almost two-year delay in ANZ notifying the regulator of the problem after it was first identified in 2017. ANZ told the FMA in mid-2019 of an issue where the bank was charging customers for two policies, where they received no additional benefit, for a period of five years.

In a separate statement, ANZ said the problems were “unintentional and caused by human error and systems issues”. That followed Westpac’s accountability reviews, released on Thursday, which blamed its 23 million alleged breaches of financial crimes law on issues including a botched technology upgrade, poor staff training and resourcing.

Junk credit card insurance has also been a big issue for Australian regulators as customers are paying for cover that is highly difficult to claim on.

Last month, the Australian Securities and Investments Commission said it had clawed back a total of $160m from 11 lenders who were selling policies which in some cases were returning as little as 6c in the dollar to affected customers. Some customers found they were not eligible to make a claim at all.

The 11 lenders included the big four banks as well as Suncorp, Bank of Queensland, Bendigo and Adelaide Bank, Citigroup, Credit Union Australia and Latitude. All lenders have since withdrawn the controversial consumer credit insurance products, which were meant to cover some or all of a customer’s repayments in circumstances such as being made redundant, injury, illness or death.

The FMA’s case against ANZ also alleges the bank “issued and failed to cancel” credit card insurance policies for ineligible customers, charging premiums on those policies for four years until May 2018.

The regulator claims ANZ contravened section 22 of the Financial Markets Conduct Act by making “false and misleading representations about the cover of the policies”, and is seeking declarations of the breaches, pecuniary penalties and costs.

In its statement, ANZ said it reported credit card insurance problems to the FMA in June 2019, and had compensated affected customers a total of about $NZ440,000 ($409,596).

“ANZ however acknowledges that it took too long to report the issues to the FMA, and will engage with the FMA on its reporting framework over the coming weeks,” the bank said.

Part of the FMA’s case centres on ANZ not disclosing the issues to it or NZ’s Reserve Bank during their joint conduct and culture review of retail banks from May to June 2018. That review requested ANZ disclose “any work underway to remediate any identified issues where conduct by your firm has resulted in detrimental outcomes for customers”.

FMA general counsel Nick Kynoch said: “While ANZ has embarked on their own remediation program, and ultimately self-reported this matter, the case points to a failure of internal systems and controls resulting in customer harm over a significant period of time.

“Self-reporting is expected, and is taken into account by the FMA when determining the appropriate regulatory outcome. In this instance, we felt it appropriate to put the matter before the courts. ANZ sold a product that, for some customers, offered no benefit.”

ANZ’s statement said the bank identified 390 customers that had more than one credit card insurance policy for their card, and admitted they only needed one.

The bank also identified a further 439 customers who were ineligible to claim the insurance.

The FMA’s proceedings relate to 307 of those customers, with policies active between April 2014 and September 2019.

“We’re very sorry this happened. We actively review our processes and systems to try and identify issues that could impact our customers. Where we find problems, we work to fix them for our customers,” said Ben Kelleher, ANZ’s NZ managing director for retail and business banking.