ASIC says Australia and New Zealand Banking Group Limited (ANZ) is refunding $28.8 million to 376,570 retail accounts, and 17,230 business accounts, after it failed to clearly disclose when certain periodical payment fees would apply.
Periodical payments are automatic ‘set and forget’ fixed-amount payments put in place by the customer. They are an alternative to direct debit arrangements, and allow customers to establish a regular payment to another account (for example, to make fortnightly rental payments). Banks may charge a fee for this service, depending on the terms and conditions for the account.
In ANZ’s case, the account terms and conditions stated that a periodical payment was a transaction to ‘another person or business.’ This meant that transactions made by the customer to another account in the customer’s own name, whether with ANZ or another financial institution, were not covered by ANZ’s own definition of a periodical payment and could not be charged the fees that could otherwise apply to periodical payments.
ANZ discovered that it was charging fees on payments made between accounts held in the customer’s own name, contrary to its definition of a ‘periodical payment’. ANZ subsequently reported the matter to ASIC as a significant breach of its financial services obligations. ASIC acknowledges the cooperative approach taken by ANZ in its handling of this matter, and its appropriate reporting of the matter to ASIC.
As a result, ANZ will refund fees that were charged to customers for payments into another account in the customer’s own name. These fees include:
- non-payment fees charged on personal and commercial accounts when the payment did not proceed because of insufficient funds held in the ANZ deposit account; and
- payment fees charged on commercial accoumts when a payment is processed from the ANZ deposit account.
The total amount being refunded includes approximately $25.8 million of fees, with an additional $3 million in interest.
ANZ has subsequently changed its terms and conditions to clarify instances where fees for periodical payments apply to an ANZ deposit account.
ASIC Deputy Chairman Peter Kell said, ‘Good fee disclosure is integral to ensuring that consumers are in an informed position about how best to manage the cost of their banking.’
ANZ has commenced contacting affected customers to explain the impact and the reimbursement and expects to complete the remediation process by the end of September 2016.
In a separate release, ANZ confirmed it has begun refunding around 390,000 accounts in relation to unclear fee disclosures for certain periodical payments. For the majority of impacted accounts, the fee refunds are below $50.
The issue relates to fees being charged for periodical payments to a customer’s own accounts.
ANZ Group Executive Australia Fred Ohlsson said: “When we identify an issue where we haven’t got things right, we will make sure our customers are not left out of pocket.”
“We proactively reported this matter to ASIC and have been working hard to ensure customers are repaid as soon as possible. We’ve already begun making payments to our customers and expect all customers will be refunded by the end of September.
“I’d like to apologise to all our impacted customers for the concern that we know issues like this can cause,” Mr Ohlsson said.
A total of $28 million is being paid that includes fee refunds and around $3 million in additional compensation. ANZ has already refunded around $11 million to 192,000 accounts.
