The Financial Markets Authority (FMA) has warned companies that they face court action and severe financial penalties for misconduct, after successfully initiating proceedings against ANZ New Zealand.

The High Court in Auckland has ordered ANZ to pay $NZ280,000 ($260,169) for making misleading representations about credit card repayment insurance to some 307 customers. The company self-reported to the regulator.

“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.

“ANZ’s admissions of these breaches demonstrate the risk of court action for these conduct failures. ANZ sold a product that, for some customers, offered no benefit.”

Justice Muir Matthew agreed with an 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.

ANZ, which stopped selling the insurance in 2019, says it has contacted and compensated affected customers and has worked to ensure no customer suffered loss as a result of the issues.

“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.”