ANZ
Bank’s breach of the Fair Trading Act through 2005 -2009 in its misleading
promotion of interest rate swaps to the rural sector has been formally recorded
on the judicial record. This follows ANZ
agreeing to pay a $19 million negotiated settlement.
The Commerce Commission responded to borrowers
concerns back in August 2012 after complaints from the farming sector that they
had been sold a pup: some farmers seeking to borrow on fixed rate term loans
had been steered into loans tied to interest rate swaps. ANZ is a major player in rural banking, holding
a market share of about 40 per cent. The
Commission alleged ANZ marketing documents and sales presentations were
misleading. The benefits of interest
rate swaps were overstated and the risks understated. Interest rate swaps are financial derivatives
used to manage or hedge interest rate risks.
ANZ customers were offered term loans with floating interest rates
coupled with separate interest rate swaps.
Swaps could fix the interest rate but not the margin which ANZ could and
did vary at its discretion. It was
misleading for ANZ to tell customers swap arrangements fixed the all-up costs
of borrowing.
ANZ agreed to the High Court declaring its
actions breached section 9 of the Fair Trading Act and further agreed to
contribute $500,000 to the Commission’s investigation costs and to establish a
$18.5 million compensation fund. The
fund is to compensate affected ANZ customers with any remainder going to rural
support trusts.
Commerce
Commission v. ANZ Bank – High Court (28.05.15)
15.058