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.