Alleged breaches in fair dealing
The Financial Markets Authority (FMA) has initiated civil proceedings against ASB Bank, accusing the bank of making false or misleading representations related to its insurance products and banking services.
Multi policy discounts at the core of allegations
One cause of action involves ASB’s failure to apply multi-policy discounts on insurance products.
FMA alleges that manual processing errors by ASB staff resulted in these discounts being misapplied.
Additionally, some customers with caravan and trailer insurance were incorrectly informed they were eligible for these discounts, despite their policies being ineligible.
Fee exemptions on banking services
The second cause of action concerns ASB’s failure to correctly apply fee exemptions for customers with certain accounts accessing ASB’s Fastnet Banking service.
As with the discount issue, the FMA claims these failures were due to staff errors, compounded by the bank’s inadequate systems for verifying fee exemptions.
Historical failures affect thousands of customers
The issues date back to 2009 for the multi-policy discount and 2011 for the Fastnet Banking fee exemptions.
Since the Financial Markets Conduct Act (FMC Act) came into effect in 2014, more than 23,000 customers were overcharged $2.8 million in premiums, while over 2,400 were overcharged $1.1 million in banking fees.
ASB has since completed remediation and repaid affected customers.
ASB’s self-reporting and FMA’s claims
ASB self-reported the issues to FMA in 2021, but FMA alleges the bank violated section 22 of the FMC Act by making misleading statements about the cost of its services.
“The FMA’s case alleges ASB’s poor systems and controls led to millions of dollars in financial harm to its customers for more than a decade,” said Margot Gatland (pictured above), FMA head of enforcement.
FMA seeks penalties
FMA, which will address NZ’s consumer credit sector at the upcoming Financial Services Federation (FSF) conference on Oct. 22 in Auckland, is seeking declarations of ASB's breach of the FMC Act, as well as pecuniary penalties and costs. The proceedings have been filed in the High Court in Auckland.
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