FMA files civil proceedings against ASB relating to the alleged overcharging of 25,497 customers by about $4.3mln

The Financial Markets Authority (FMA) has filed civil proceedings against ASB in the High Court at Auckland, for allegedly making false or misleading representations in relation to insurance products and banking services, after the bank self reported to the FMA.

 The FMA says the proceedings have two causes of action. The first relates to the failure to apply multi policy discounts on ASB-branded insurance products underwritten by IAG dating back to 2009. The second relates to ASB’s failure to consistently apply fee exemptions to customer accounts with access to ASB’s Fastnet Banking service dating back to 2011.

Some 23,062 customers were affected by the multi policy discount issue between April 2014 and May 2022, the FMA says, with the total value of overcharged premiums about $2.8 million. Meanwhile, 2,435 customers were affected by the Fastnet Banking issue, totalling about $1,147,276 in overcharges.

ASB has completed remediation on both issues, repaying affected customers, including use of money interest, the FMA says.

"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," Margot Gatland, the FMA's Head of Enforcement, says.

The FMA alleges misapplication of the multi policy discount occurred because of errors in the manual process undertaken by ASB staff at the point of sale for insurance products.  It says 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.

ASB’s alleged failure to consistently apply fee exemptions to certain customer accounts with access to ASB’s Fastnet Banking service, specifically relates to 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 FMA says.

"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."

The FMA says ASB self-reported the multi policy discount issue to the regulator 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."

ASB acknowledges mistakes

An ASB spokeswoman says the bank acknowledges it made mistakes in the two situations and wants to apologise to customers impacted by its errors.

"ASB self-reported both issues to the FMA in 2021. As well as working to refund affected existing and past customers, including use of money interest, we have made changes to our processes, and worked closely with our insurance partner in relation to the multi-policy discount matter, to ensure these issues won’t occur again," the ASB spokeswoman says.

"We’re unable to provide further comment at this time as this matter is now before the courts."