ANZ faces $125m payout after High Court ruling over loan calculator coding error

Key facts

• High Court Justice Geoffrey Venning ruled ANZ breached the Credit Contracts and Consumer Finance Act (CCCFA) between 2015 and 2019.
• A coding error in ANZ's loan calculator from May 30, 2015 to May 28, 2016 led to incorrect loan variation letters.
• About 17,000 customers were affected; on average, they were undercharged by about $2 per month.
• ANZ self-reported to the Commerce Commission and paid over $35 million in remedial payments.
• The court ordered ANZ to reimburse all borrowing costs, potentially costing up to $125 million.
• ANZ chief executive Antonia Watson expressed disappointment and is considering an appeal.
• Plaintiff lawyer Scott Russell called the judgment an important step in holding ANZ accountable.

Court ruling triggers potential $125m liability for ANZ

ANZ New Zealand faces a potential $125 million payout after the High Court ruled that the bank must reimburse all borrowing costs for about 17,000 customers affected by a loan calculator coding error. Justice Geoffrey Venning found that ANZ breached the Credit Contracts and Consumer Finance Act (CCCFA) between 2015 and 2019, requiring the bank to repay all interest and fees charged during the non-compliant period. The bank had previously paid over $35 million to rectify the error, but the court determined that this was insufficient. The ruling could set a precedent for consumer protection in the banking sector, emphasizing the importance of accurate disclosure.

Coding error led to undercharged interest and incorrect loan documents

Between May 30, 2015 and May 28, 2016, a coding error in ANZ's system failed to account for accrued but uncharged interest, resulting in loan variation letters containing incorrect information. As a result, customers were undercharged by about $2 per month on average. The bank identified the issue itself, reported it to the Commerce Commission, and wrote off the underpayments. ANZ argued that the error meant customers paid less interest, not more, and that the remedial payments left them better off. However, the court focused on the legal requirement for lenders to provide accurate disclosure, regardless of the financial impact on borrowers.

Court rejects ANZ's argument that consequences are disproportionate

Justice Venning rejected ANZ's contention that the potential consequences under the current law are disproportionate to any actual harm. In his judgment, he cited economist Shamubeel Eaqub's evidence that the errors were economically significant and eroded trust in the market. Eaqub argued that non-compliant disclosure diminishes product comparability, reduces competition, and causes economic loss to consumers. The judge wrote that a rational consumer would prefer a credit product with compliant disclosure, and that the fact the interest rate was broadly consistent with market benchmarks did not validate the product attributes competitively. This reasoning underscores the court's view that procedural compliance is fundamental to market integrity.

ANZ considers appeal as plaintiffs celebrate accountability

ANZ chief executive Antonia Watson expressed disappointment with the ruling, stating that the bank opposed the claim because it believed the law was not intended to operate as the plaintiffs and litigation funders suggested. She maintained that the potential consequences are disproportionate and not aligned with any actual harm. ANZ is considering whether to appeal the decision. In contrast, Scott Russell, the lawyer representing the customers, hailed the judgment as an important step in holding ANZ accountable under consumer protection legislation. He noted that the next steps depend on whether ANZ appeals, leaving the final outcome uncertain.

Class action highlights broader implications for consumer finance

The case centers on the interpretation of the CCCFA, which requires lenders to provide accurate disclosure to borrowers. The ruling affirms that breaches of disclosure requirements carry significant financial penalties, even if the error resulted in undercharging. This could encourage more class actions against lenders for similar compliance failures. The decision also raises questions about the role of litigation funders in consumer cases. ANZ criticized the involvement of funders, arguing that they drive disproportionate claims. However, the court's judgment suggests that the law's protective purpose outweighs such concerns.

What comes next for ANZ and affected customers

The immediate next step is for ANZ to decide whether to appeal the High Court's decision. If the ruling stands, the bank must calculate and pay the full reimbursement of borrowing costs for all 17,000 customers, potentially reaching $125 million. The process of determining individual payouts could be complex and may involve further court proceedings. For affected customers, the judgment offers the prospect of compensation beyond the $35 million already paid. However, any appeal could delay payments for months or years. The case will be closely watched by the banking industry and consumer advocates as a test of lender accountability under New Zealand law.

A landmark ruling for consumer rights in banking

Justice Venning's decision marks a significant victory for consumer protection in New Zealand, reinforcing that lenders must adhere strictly to disclosure requirements. The ruling sends a clear message that technical errors with minimal financial impact can still lead to substantial liabilities if they breach statutory obligations. As the banking sector grapples with the implications, the case underscores the importance of robust compliance systems. For now, the focus remains on whether ANZ will appeal, and how the broader financial industry will respond to this judicial reaffirmation of consumer rights.

The bottom line

• The High Court ruled that ANZ breached the CCCFA due to a coding error, requiring full reimbursement of borrowing costs.
• The potential $125 million payout far exceeds the $35 million already paid by ANZ for the error.
• Justice Venning emphasized that even minor undercharges do not absolve lenders from disclosure compliance.
• ANZ is considering an appeal, which could delay compensation for affected customers.
• The case highlights the role of class actions and litigation funders in enforcing consumer protection laws.
• The ruling may prompt other lenders to review their compliance systems to avoid similar liabilities.