ANZ fined $280,000 over credit card insurance "duplicate policy" debacle

ANZ fined $280,000 over credit card insurance "duplicate policy" debacle | Insurance Business

ANZ fined $280,000 over credit card insurance "duplicate policy" debacle

ANZ, New Zealand’s largest bank, has been ordered by the High Court to pay a fine of $280,000 over misleading sales of credit card repayment insurance (CCRI).

The High Court granted the penalty sought by the Financial Markets Authority (FMA) for ANZ after the bank admitted to breaching regulations. The regulator filed legal proceedings against the bank in June 2020.

ANZ had issued duplicate CCRI policies, which provided no cover or benefit, to customers between April 2014 and November 2019. CCRI is supposed to pay for part of whole of a person’s credit card bills in case of job redundancy, bankruptcy, injury, illness or death of the insured.

The bank revealed that it had at least 390 customers that had multiple CCRI policies, while 439 customers were ineligible to make any claims on the insurance. According to the FMA, ANZ knew that the customers were ineligible, yet they did not cancel the policies and still continued to charge them.

“From approximately December 1998, ANZ issued some customers already holding an existing CCRI policy with one or more additional policies ("duplicate policies"). It did so due to deficiencies in its sales and fulfilment systems and errors in its computer systems,” read the High Court decision write by Justice Matthew Muir.

While breaches have been discovered dating back more than 20 years, the FMA only sought to prosecute violations since 2014, which was when the Financial Markets Conduct Act 2013 (FMCA) came into effect, the New Zealand Herald reported. This is also the first civil proceeding brought up by the FMA for violations of fair-dealing provisions stated in the law.

According to ANZ, it had stopped selling CCRI in 2019 and self-reported the issues to the FMA that year. It also paid $440,000 in compensation to affected customers.

According to Muir, while ANZ took too long to report the breaches, it was mitigated by its constructive engagement with regulators since its admission. However, Muir also noted that many problems were “hiding in plain view” and that ANZ did not exert enough effort to root them out.

“ANZ simply was not looking or looking adequately in the right places. That is a process or systems failure and as such general deterrence is a relevant consideration,” Muir said regarding the decision to impose the fine.