ASB was ordered to pay a $2.1 million penalty after overcharging customers for nearly a decade, with the penalty increased in part because of its failure to act promptly on staff warnings.
In 2013, a member of the Bank’s wealth team was told to shut up after sending some sixty emails to his line manager warning that client insurance policy discounts were being wrongly calculated.
It was not until 2021, after a then recent royal commission on banking in Australia heavily criticised operation of retail banks, that ASB senior management sat up and took notice of the problem.
The High Court was told that since 2011 ASB staff had been miscalculating some insurance premium discounts for policies sold on behalf of IAG Insurance.
Confusion saw premium discounts not being given when bank customers had more than one qualifying IAG policy, and also discounts wrongly given when customers had more than one policy which included caravan and motorbike policies which were not eligible for a premium discount.
ASB and IAG jointly agreed to reimburse affected customers; ASB’s share being $2.9 million.
The High Court was also told ASB did not apply promised bank fee reductions for many FastNet business customers for the period 2011 through to 2020.
ASB senior management did not become aware of the extent of the problem until a mid-2019 ‘deep dive,’ following up complaints from business customers.
The fact bank fees were disclosed on business customer accounts as a single line item kept the issue hidden for years. Anomalies only became apparent after some business customers asked for a detailed breakdown of fees charged.
Errors were found in 21 per cent of business accounts.
ASB told the High Court that the mistake was unintentional, not pursued for financial gain.
Errors arose because granting a fee concession was a manual procedure. The Bank had no systems in place to ensure discounts were properly applied.
ASB self-reported its mistakes to Financial Markets Authority, admitting to breaches of the Financial Markets Conduct Act; making false and misleading statements in its provision of financial services. Advertised discounts were not applied as promised.
ASB negotiated a $2.1 million penalty with Financial Markets Authority.
This penalty was approved by the High Court.
FMA has first claim on this money; recovering its costs.
Financial Markets Authority v. ASB Bank – High Court (4.03.26)
26.092