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INL Digital Edition June 15 2020

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JUNE <strong>15</strong>, <strong>2020</strong><br />

Businesslink<br />

Financial Markets Authority takes ANZ to court<br />

‘False and misleading<br />

representation over<br />

credit card insurance<br />

charges’<br />

Supplied Content<br />

The Financial Markets<br />

Authority (FMA) has filed<br />

High Court proceedings<br />

against ANZ Bank New<br />

Zealand (ANZ), alleging that the<br />

Bank charged some customers for<br />

Credit Card Repayment Insurance<br />

(CCRI) policies that offered those<br />

customers no cover.<br />

Two causes of action<br />

The FMA proceedings have two<br />

causes of action. Firstly, that ANZ<br />

issued duplicate CCRI policies to<br />

some customers, which provided<br />

no additional benefits or cover,<br />

and charged premiums on those<br />

policies, during the period April<br />

2014 and November 2019.<br />

Secondly, ANZ issued and failed<br />

to cancel CCRI policies for ineligible<br />

customers, also charging premiums<br />

on those policies, during the period<br />

1 April 2014 – May 2018. These two<br />

issues relate back to at least 2001.<br />

However, the FMA claim reflects<br />

the introduction of the Financial<br />

Markets Conduct Act 2013, which<br />

came into effect from April 2014.<br />

The FMA claims that ANZ<br />

contravened section 22 of the<br />

Financial Markets Conduct Act<br />

by making false and misleading<br />

representations about the cover of<br />

the policies.<br />

The regulator is seeking declarations<br />

of contravention of<br />

the Financial Markets Conduct<br />

Act, pecuniary penalties and<br />

costs.<br />

Duplicate Policy Issue<br />

ANZ first identified the duplicate<br />

policy issue around September<br />

2017 and the ineligible<br />

customers issue was identified<br />

around May 2018. ANZ did<br />

not disclose either issue to the<br />

FMA or Reserve Bank during<br />

their joint conduct and culture<br />

review of New Zealand’s retail<br />

banks from May to <strong>June</strong> 2018.<br />

The review requested that ANZ<br />

disclose “any work underway<br />

to remediate any identified<br />

issues where conduct by your<br />

firm has resulted in detrimental<br />

outcomes for customers.”<br />

ANZ first notified the FMA of<br />

both issues in <strong>June</strong> 2019.<br />

Internal systems failure<br />

FMA General Counsel, Nick<br />

Kynoch said, “While ANZ<br />

has embarked on their own<br />

remediation programme, and<br />

ultimately self-reported this<br />

matter, the case points to a<br />

failure of internal systems and<br />

controls resulting in customer<br />

harm over a significant period<br />

of time. Self-reporting is<br />

expected, and is taken into<br />

account by the FMA when<br />

determining the appropriate<br />

regulatory outcome. In this<br />

instance, we felt it appropriate<br />

to put the matter before the<br />

courts.<br />

“ANZ sold a product that, for<br />

some customers, offered no<br />

benefit.”<br />

CCRI is a form of insurance<br />

which covers some or all of a<br />

customer’s outstanding credit<br />

card repayments in certain<br />

circumstances, including<br />

in the event of a customer’s<br />

bankruptcy, redundancy,<br />

injury, illness or death.<br />

Source: Financial Markets<br />

Authority, Wellington.<br />

Central Government should help<br />

cash-strapped Councils<br />

Julian Wood<br />

Auckland Council is forecasting<br />

a $525 million dollar hole in its<br />

budget as a result of Covid-19.<br />

It is not alone. Across the<br />

country, City and regional Councils are<br />

adjusting their budgets.<br />

Wellington City Council is deciding what<br />

to do with a $70 million dollar shortfall,<br />

Hamilton City is facing a $22 million<br />

dollar drop in non-rates income and the<br />

Northland Regional Council is facing a $4<br />

million shortfall.<br />

Restoring 60% or even 80% of these<br />

funding shortfalls over the coming year<br />

would be a lifeline for the local businesses<br />

who rely on Council contracts.<br />

Range of options<br />

When a local authority is facing a<br />

financial hole it has a range of options.<br />

It can increase its rates and fees, sell<br />

assets, borrow more, cut its current spending<br />

and or decide to defer new planned<br />

projects or maintenance.<br />

Most are likely to employ all these tactics<br />

at the same time. Take the Northland<br />

Regional Council, this $4 million dollar<br />

shortfall will mean $1.2 million will be<br />

cut from its existing budget, roughly<br />

$800,000 of new work delayed, and<br />

another $410,000 saved by not filling<br />

vacant positions.<br />

While local government is facing a<br />

funding crisis across the country, our<br />

central Government is spending up large.<br />

They are promising spending at levels we<br />

have never seen, so much that they are<br />

having to bring forward ideas and ask<br />

the regions for “shovel-ready” projects in<br />

order to stimulate the economy and create<br />

jobs.<br />

All the while, Councils are slashing and<br />

09<br />

burning line items and delaying projects<br />

that were already in motion and in some<br />

cases ready to go.<br />

This mini-austerity over the country, is<br />

like a death of a thousand cuts for smaller<br />

local businesses and service providers.<br />

Central Government War Chest<br />

It should not be a controversial or<br />

surprising idea that central Government<br />

should use some of its $20 billion Covid-19<br />

war chest to plug some of the gaps in<br />

council revenue.<br />

That is not to say that the government<br />

should just hand over all the money<br />

needed to make up the difference; it is<br />

right that Councils should be forced to<br />

examine their spending, eliminate waste<br />

and prioritise work. But if we are to<br />

choose between big central government<br />

spending on projects that will take years<br />

to get going, or topping up budgets to<br />

allow local work that is already underway<br />

to keep going it’s time to choose the latter.<br />

Local governments contract smaller<br />

businesses to do all the unsexy stuff that<br />

make our lives better.<br />

They ensure that water flows into our<br />

homes, that waste leaves them, that drains<br />

do not block or are unblocked when they<br />

do.<br />

They contract out the maintenance on<br />

our local roads, ensuring that the lights at<br />

intersections work, that hazard signs are<br />

erected and maintained, that local parks,<br />

pools and public transport keep ticking<br />

over and are safe and up to date.<br />

It is time that the central government<br />

gave control of a small portion of their<br />

war-chest to local government and in<br />

doing so provide a lifeline for the many<br />

small businesses that are in grave danger.<br />

Julian Wood is a Researcher at Maxim Institute<br />

based in Auckland.

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