New Zealand’s regulator is taking ANZ to court for selling insurance policies which provided no benefit.

The Financial Markets Authority (FMA) proceedings relate to ANZ Bank New Zealand customers who held credit card repayment insurance (CCRI) policies from April 2014 to late last year.

ANZ, which no longer sells the product, acknowledges it “took too long” to report the issues, waiting almost two years from the time it first detected them. It has already spent around $NZ440,000 ($409,000) compensating affected customers.

“We’re very sorry this happened,” ANZ MD Retail and Business Banking Ben Kelleher said.

“We actively review our processes and … where we find problems, we work to fix them for our customers.”

ANZ has contacted all affected CCRI policyholders to apologise and compensate them. The bank says the poor sales practice was unintentional and caused by human error and systems issues.

CCRI provides cover for customers unable to repay credit card debt for reasons like bankruptcy, redundancy, injury, illness or death.

In Australia, remediation payments for junk insurance are set to top $160 million after the regulator last July ordered 11 banks and lenders to undertake a large-scale compensation program. All those lenders have ceased to sell consumer credit insurance with credit cards, personal loans or home loans.

The FMA says ANZ first identified that 390 of its customers held duplicate CCRI policies, where each policy gave the same cover, in September 2017. In May 2018, it was found by the bank that 439 customers were ineligible to claim on the CCI insurance it had sold them.

ANZ did not disclose either issue until June last year.

That was even as the FMA and Reserve Bank of New Zealand held a joint conduct and culture review of retail banks in the middle of 2018 requesting that 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 says the case points to a failure of internal systems and controls “resulting in customer harm over a significant period of time”.

The FMA proceedings allege ANZ issued duplicate CCRI policies to some customers, which provided no additional benefits or cover, and charged premiums on those policies from April 2014 and November 2019, and secondly that ANZ issued and failed to cancel CCRI policies for ineligible customers, charging premiums from April 2014 to May 2018.

The two issues relate back to at least 2001 but the Financial Markets Conduct Act only came into effect from April 2014.

“ANZ sold a product that, for some customers, offered no benefit,” the FMA says. “We felt it appropriate to put the matter before the courts.”

ANZ says it will engage with the FMA on its reporting framework over the coming weeks.