The High Court in Auckland has ordered ANZ New Zealand to pay $NZ280,000 ($260,169) for making misleading representations about credit card repayment insurance, and has warned deterrence will be a key factor in setting penalties for Financial Markets Conduct Act breaches.

The civil penalty reflected submissions from the Financial Markets Authority (FMA), which pursued legal action over policies offering no cover or benefit. The court hearing related to 307 customers.

ANZ, which self-reported the matter and stopped selling the insurance in 2019, says it has contacted and compensated affected customers.

“We regret the errors and apologise to the customers involved,” MD Personal Ben Kelleher said.

“We disclosed the issues to the FMA when we had a clear idea of the extent of the problems and could report them fully and accurately. We’ve acknowledged that process took too long.”

Justice Matthew Muir said in a decision this month that consumers are entitled to trust the accuracy of any bank’s communications and systems.

“Consumers cannot be ‘confident’ in their participation [in financial markets] if they are required to double check the precise details of every transaction with their bank,” he said.

“The fact that a vigilant consumer could have identified the problem earlier does not in my view materially mitigate culpability.”

Justice Muir says he accepted the FMA submission that to achieve deterrence, it will generally be appropriate for the penalty starting point to be substantially higher than the gain obtained.

“This ensures that penalties are set at a level where they are not seen merely as a cost of doing business and sends appropriate signals to the market in terms of the importance of compliance with the Act,” he said.

Justice Muir accepted the contraventions were inadvertent but were the product of deficient processes and systems in place for a significant period, and given ANZ’s resources and position as one of New Zealand’s leading banks, its systems should have been able to detect the issues earlier.

The civil proceedings were the first FMA has brought under the fair-dealing provisions in Part 2 of the Financial Markets Conduct Act.

“We have talked consistently about the risks of consumer harm when firms fail to maintain appropriate systems to manage conduct risk,” FMA Head of Enforcement Karen Chang said yesterday. “ANZ’s admissions of these breaches demonstrate the risk of court action for these conduct failures.”

ANZ says it worked proactively with the FMA last year on requirements for self-reporting.

“It’s important to us that our customers are treated fairly,” Mr Kelleher said. “We’ve worked hard to ensure no customer suffered loss as a result of the issues.”