The Commerce Commission has reached a settlement with ANZ that will see the bank pay out $18.5 million to rural customers who complained about its interest rate swaps.
ANZ will also pay $500,000 to the Commission for its investigation costs. Some of ANZ’s payout will also be distributed to charities that benefit the rural community.
According to a statement from the Commission, ANZ has agreed to admit in High Court proceedings it engaged in conduct that was misleading to some customers.
Commerce Commission chairman Mark Berry said the settlement was a good outcome as court proceedings would have delayed achieving possible payments.
“The Commission considers that ANZ’s behaviour led some customers to believe that margins on the loan connected with the swap would not change, early termination amounts would be similar to break costs for equivalent fixed rate term loans, and that swaps would be for them a good substitute for a fixed rate term loan,” Dr Berry said.
“In reality, ANZ could, and in some instances did, increase margins, and early termination amounts could be significantly higher.”
The Commission will be seeking High Court declarations that the bank’s conduct breached the Fair Trading Act 1986. A hearing of that application is likely to take place early next year.
The Commission noted its conclusions had not been tested in court and ANZ did not accept them. The Commission will be contacting 178 customers who may be eligibile for a payment.
Some farmers are reportedly considering a class action lawsuit given their share of ANZ’s payout is less than what the swap cost them. Those who accept a settlement payment forfeit the right to take further legal action.
Discussions with Westpac and ASB, which were investigated by the Commission in relation to interest rate swaps, are continuing. The Financial Market Authority has also settled with ANZ over the swaps.
The FMA said: “As part of the settlement agreement, ANZ has provided the FMA with enforceable undertakings in relation to ANZ’s future conduct. Specifically, the undertakings require ANZ to engage a third-party to review its processes and procedures for future sales and marketing of interest rate swaps and forex forward contracts.”