ANZ National ordered to pay $11m for credit card breach

ANZ National Bank has to cough up $11.325 million for failing to properly disclose fees charged on its credit cards.

The country's other big banks could face similar payouts, with the Commerce Commission also pursuing prosecutions of Bank of New Zealand, Westpac, ASB, TSB, American Express, Diners Club and The Warehouse Financial Services are continuing. The Commission said it would not comment on the ongoing proceedings.

ANZ National has agreed to refund $10 million to customers who made foreign currency transactions on their credit cards between certain dates, and has also been fined $1.325 million.

The bank pleaded guilty in Auckland District Court to 45 charges of breaching the Fair Trading Act.

At the time the breaches occurred ANZ and the National Bank had not merged -- 19 of the guilty pleas related to actions of the ANZ bank, and 26 to the National Bank.

For ANZ customers the relevant period was December 1, 2001 to July 8, 2004, and for National Bank customers it was from February 1, 2002 to September 20, 2004.

Commerce Commission chairwoman Paula Rebstock said many consumers would have unknowingly paid the currency transaction charges.

ANZ National Bank has to contact affected cardholders, including people who are no longer customers. The $10 million will be held in a trust account which will be administered by an independent auditor.

The Commerce Commission launched an investigation after complaints that credit card fees were being charged on top of foreign exchange rates, but not properly disclosed.

The commission said the fees were not shown on bank statements, in the transaction schedule, and in some cases were not mentioned in the banks' terms and conditions or fee schedule.

Customers were charged fees between 2 per cent and 2.5 per cent of the total transaction.

Judge Graham Hubble said in sentencing today that financial organisations had an obligation to ensure there was openness and frank disclosure, particularly in relation to fees.

Judge Hubble added the offences were "the very offending the Act tries to prohibit to ensure consumer protection".

Ms Rebstock said the guilty pleas by ANZ National Bank and its willingness to refund customers had resulted in a speedy resolution.

She said since the commission's investigation began, banks had started disclosing fees charged on overseas currency transactions, which should help competition.

"While fees like these remain hidden, banks have no incentive to compete with each other to offer customers lower fees."

She said the court settlement would not stop customers from taking their own action under the Fair Trading Act.

The Commerce Commission said the $1.325 million fine was the highest ever imposed under the Fair Trading Act. The previous highest penalty imposed on a single company was a $60,000 fine imposed on EcoWorld in 2005.

- NZPA