ASB appeals class action lawsuit asking the bank to repay interest payments made by hundreds of thousands of customers between 2015 and 2019

ASB is appealing a High Court decision which permitted a broad class action lawsuit to be brought against the bank. 

Arguments in the Court of Appeal began on Tuesday and will continue throughout Wednesday. 

In September 2021, Australian litigation funder CASL and New Zealand litigation funder LPF Group brought a multi-million dollar class action claim against ANZ and ASB. 

It argued the two banks should refund some 150,000 customers for interest payments they were not entitled to take and keep — as they had not sufficiently disclosed some changes.

The plaintiffs want to bring the case on behalf of all affected customers, not just those who have opted into the case. 

In July last year, the High Court gave its blessing to the case continuing on an “opt-out basis” which is what ASB is now appealing. 

ASB said in a statement to the NZX the plaintiffs’ proposed class action would cover all customers who had a home or personal loan with ASB between June 2015 and 2019 who were not given compliant disclosure. 

“Given this definition and the fact that issues raised in the claim have not been determined by the courts before, the size of the proposed class is unknown. However, the proposed class and the allegations made in the proceedings would potentially cover hundreds of thousands of loans,” it said. 

The bank does not think it is appropriate for the case to proceed as an opt-out proceeding and also denies the actual claims — which it will also defend in court. 

In the claim, plaintiffs argue that ASB is not entitled to retain any interest or fees paid by affected customers for the period in which ASB did not provide sufficient disclosures. 

ASB and ANZ banks have both already agreed to multi-million dollar settlements with the Commerce Commission, in which they admitted to breaching their responsible lending obligations. 

The plaintiffs bringing the class action have argued this demonstrates the banks failed to make sufficient disclosure, and does not prevent customers from taking additional legal action. 

The case is being brought under the Credit Contracts and Consumer Finance Act (CCCFA). It argues the two banks should refund interest and fees they were not entitled to charge due to breaches of their disclosure obligations. 

Banking Class Action solicitor Scott Russell has argued that if a bank fails to comply with its disclosure obligations, it is not legally entitled to charge interest or fees on the affected loan until the failure is remedied.

"If a bank fails to comply with its disclosure obligations, it is not legally entitled to charge interest or fees on the affected loan until the failure is remedied,” Russell says.

“To the extent a bank receives interest or fees it is not entitled to, it must refund or credit those amounts to the customer as soon as practicable”. 

In court on Tuesday, ASB’s lawyer Jack Hodder KC argued the opt-out class action was too broad and the class involved was poorly defined. 

The disclosures made to customers were variable which made it difficult to determine whether an alleged breach applied to all, or just some, of those in the class. 

A lawyer for the plaintiff, Davey Salmon KC, argued that a broad class action provided justice for affected customers who would never be motivated enough to take action themselves. 

He said this was particularly true when challenging financial institutions that held a lot of influence over people’s lives. They “don’t want to rock the boat”. 

ASB’s lawyer also argued that there had been no specific harm to customers that may have received insufficient disclosure and continued paying interest. 

He suggested the only motivation was that it “would be nice to have interest free loans” and there was “no particular harm, other than people not wanting to pay interest”. 

The plaintiff’s lawyer responded by saying it was not a question of customer loss, rather it was about whether the banks had taken money they were not entitled to. 

ASB and ANZ were not legally allowed to charge interest without making the necessary disclosures, and were now trying to hold onto money that was not theirs, he said.