FMA Files Proceedings Against ASB For Alleged Fair Dealing Breaches

The Financial Markets Authority – Te Mana Tātai Hokohoko – has filed civil proceedings against ASB Bank Limited for allegedly making false or misleading representations in relation to insurance products and banking services.

The FMA’s proceedings have two causes of action. The first relates to the failure to apply multi policy discounts on ASB-branded insurance products. The FMA alleges that the misapplication of the multi policy discount arose through errors in the manual process undertaken by ASB staff at the point of sale for insurance products.  A sub-issue involved ASB staff misinforming customers with policies of insurance for caravans and trailers that they were eligible for the multi policy discount, despite those policies being ineligible.

The second cause of action is in respect of ASB’s failure to consistently apply fee exemptions to certain customer accounts with access to ASB’s Fastnet Banking service, specifically:  Society Cheque, Education Administration, and Business Focus accounts. As with the multi policy discount issue, the FMA alleges the failures arose through errors in the manual process undertaken by ASB staff. ASB did not have adequate systems in place to check that the fee exemptions were being applied correctly.

The multi policy discount issue dates back to 2009 and the Fastnet Banking issue began in 2011. However, the FMA’s claim reflects the introduction of the Financial Markets Conduct Act 2013 (FMC Act), which came into effect from April 2014.

A total of 23,062 customers were affected by the multi policy discount issue between April 2014 and May 2022. The total value of overcharged premiums was approximately $2.8 million. During the same period, 2,435 customers were affected by the Fastnet Banking issue, totalling approximately $1,147,276 in overcharges. ASB has completed remediation work on both causes of action and has repaid affected customers, including use of money interest.

ASB self-reported the multi policy discount issue to the FMA in September 2021 and the Fastnet Banking issue in December 2021.

The FMA claims that ASB breached section 22 of the FMC Act by making false and misleading representations regarding the price of its insurance products, the availability of certain benefits (in respect of the caravan and trailer policies), and the price of its banking services. The FMA is seeking declarations ASB breached the FMC Act, pecuniary penalties and costs.

FMA Head of Enforcement, Margot Gatland, said: “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. While we acknowledge ASB’s efforts to remediate the issues, the length of time it took to identify and the resolve the mistakes was pertinent to the FMA’s decision to file civil court action.”

The proceedings were filed in the High Court in Auckland.

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