Customers get $10m after bank admits guilt

ANZ and National Bank customers will get a $10 million refund after New Zealand's largest bank was hit with the country's biggest ever Fair Trading Act fine - $1,325,000.

The bank has pleaded guilty to collecting secret fees on credit card foreign exchange transactions, charges that customers should have been told about.

All the major banks kept the charges secret, but ANZ-National's case was the first to come to court.

ANZ-National pleaded guilty to 45 breaches of the Fair Trading Act - 19 for the ANZ and 26 for the National Bank - in the Auckland District Court.

It will pay reparations of $10 million, to be refunded to customers who paid the undisclosed fees.

Another $160,000 contribution will be made towards the Commerce Commission's legal bill.

What this settlement means for the other banks is unclear - the commission is also prosecuting the ASB Bank, Bank of New Zealand, TSB Bank and Westpac and will be hoping the guilty plea prompts a rush for similar deals.

BNZ yesterday said it would not comment on the case, ASB said it was in talks with the commission. Westpac had yet to comment on the ANZ-National deal.

Credit card companies Diners Club (New Zealand) and American Express (New Zealand) International and the Warehouse Financial Services company are also being prosecuted.

Judge Graham Hubble described the ANZ-National case as "most serious" and said the offending struck at the heart of the Fair Trading Act.

The fine and agreement to pay costs end the criminal charges the bank faced in the district court, and the reparation brings an end to civil litigation launched by the commission against the bank in the High Court.

Consumers' Institute chief executive David Russell said the decision was a victory for the consumer in two respects.

"One, it has effectively stopped misleading practices, but of greater importance the court has seen fit to compensate consumers.

"It won't necessarily be the full amount that you have lost but nevertheless it is a very good signal to the trading community and banks that if they are misleading in their practices, they can not only expect to be fined a substantial sum of money ... but they are also likely to be ordered to make compensation to individual consumers."

Mr Russell said the $10 million in compensation was a large amount, even for big banks, to have to pay out.

He hoped ANZ-National's guilty plea would show the way for the banks which are yet to be dealt with.

"I think it gives a clear signal to the other banks to forget about long legal battles and get on and make some compensation to their customers."

ANZ-National Bank chief executive Graham Hodges apologised to the bank's customers for not telling them about the fees.

"We accept that the way in which we disclosed the cost of currency conversion a few years ago was inadequate. This should not have occurred, and we want to put it right.

"We take compliance with regulation very seriously and it is unacceptable that we have not got this right."

The bank had pleaded guilty because it had got it wrong and there was a case to answer, Mr Hodges said.

"The best thing to do is correct it. Reach an agreement, pay our fines and pay compensation."

He would not say if the other banks should also plead guilty in their cases.

"Every organisation has to work out how they're going to manage these themselves," he said. "We felt in the end that if we've done the wrong thing, we're better to correct it and move on."

WHAT OTHER BANKS SAY

ASB

* The ANZ-National stance was a responsible one. ASB has been assisting the Commerce Commission with their investigation for quite a few months and will continue to do so.

Westpac

* Westpac has disclosed its foreign currency conversion fee in our price list at all times during the period of the Commerce Commission investigation. We believe our disclosure of these fees has been adequate. We will continue to evaluate our position, which involves different facts and circumstances to those supporting the ANZ/National case.

BNZ

* Declined to comment.

- additional reporting: Elizabeth Binning and Adam Bennett