Neil Sands
The government has ditched retrospective legislation that would have hobbled a multi-million banking class action, accepting a Parliamentary select committee’s advice to back down rather than pursue the controversial change.
Scott Simpson
Scott Simpson announced the U-turn on Monday after Parliament’s Finance & Expenditure Select Committee outlined its position on the retrospective provisions of the Credit Contracts and Consumer Finance Amendment (CCCFA) Bill.
“Through the select committee process, it was suggested that ongoing court cases be exempt from these provisions. The committee considered this carefully and recommended that approach, and the government parties agree,” Simpson said.
The committee said it received 1,543 submissions opposing the retrospective action, with legal professionals, academics and constitutional law experts all expressing concerns.
There were just 15 submissions supporting the planned change.
The lead lawyer for plaintiffs in the case, Scott Russell of Auckland firm Russell van Hout, applauded the decision.
“It’s a real win for consumer class actions in the face of powerful commercial lobby interests,” he told LawNews.
The class action launched against ANZ and ASB in 2021 centres on allegations of inadequate disclosure about loan variations between 2015 and 2019. It is seeking a refund for affected customers of all interest payments and fees over the four-year period.
ASB agreed to settle for $135.6 million earlier this month, subject to High Court approval, while ANZ has vowed to fight on.
‘Clearly unfair: ANZ’
ANZ chief executive Antonia Watson told the select committee in July that the class action was an opportunistic attempt to exploit a loophole in legislation relating to 2015-2019.
Watson said a faulty loan calculator meant ANZ had made some disclosure mistakes over that period, but the end result was that customers were actually undercharged by $2 a month for a year.
She said ANZ wrote off the underpayments, reported the issue to the regulator and ended up paying $35 million in penalties.
“There is no customer harm. Customers ended up better off,” she said. “Now a litigation funder is exploiting a legal interpretation that Parliament recognised was flawed in 2019 and tried to fix. They claim that any error in disclosure, no matter how small, means repaying all the interest and fees on loans during the time of the error. A free loan – that’s clearly unfair.”
The Reserve Bank has estimated that under a worst-case scenario, the legal loophole could cost the financial sector $12.9 billion.
Concerned at the prospect, the government included clauses in the CCCFA bill that retrospectively change the legal standard applied for compensation in such cases to “just and equitable”, rather than a blanket reimbursement of payments.
While retrospective legislation is rare, the CCCFA changes were even more unusual because they specifically included the banking class action Simons & Ors v ANZ Bank Limited and ASB Bank Limited, even though it had been active before the courts for years.
Russell and the class action group cried foul, accusing the government of bowing to lobbying from the banking sector to protect Australian-owned banks.
Fixing bad law
Under the changes recommended by the select committee, and accepted by Simpson, the retrospective fix will still apply to new cases, but not to banking class action.
The select committee said it did not know if there were plans for any new cases but, even if any were in the offing, they were unlikely to begin before the CCCFA was passed.
Russell said the changes avoided an outcome that would have undermined the rule of law.
“Applying a retrospective change in law to an active court case being taken on behalf of ordinary New Zealand customers was never in the public interest and lacked any credible rationale,” he said.
Simpson said feedback to the select committee contributed to the changes and thanked those who made submissions.
“The intent has always been to fix bad law and ensure the courts have the discretion to reach fair and equitable outcomes,” he said.
Simpson conceded that the row over retrospectivity had overshadowed other elements of the CCCFA, which he said would reduce red tape, make access to credit easier and “restore common sense to lending”.
The CCCFA is a broad-ranging bill containing some initiatives that have been widely lauded, including transferring regulatory responsibility for consumer credit to the Financial Markets Authority and stopping directors of credit providers from being personally liable for bad loans.
It eases restrictions introduced in 2021 that were aimed at stopping loan sharks from exploiting vulnerable consumers but also affected reputable lenders, resulting in mortgage-seekers being grilled about Netflix accounts and coffee consumption.
The resulting credit crunch contributed to New Zealand’s house price slump.
“Many will remember the frustration of being asked intrusive questions about everyday expenses such as takeaways or streaming subscriptions when applying for a home loan,” Simpson said.
“That is why the government acted to remove unnecessary rules, bring back common sense, and made it easier for responsible borrowers to access finance.”
The class action against ANZ will be heard in the High Court in March 2026.
