ASB joins ANZ in declining legal settlement proposal, as Winston Peters comes in to bat for them
Having worked on the class action for four years, they argued it was unfair for the Government to change the rules of the game now - after it had been lobbied by the banks.
The retrospective law change could reduce the damages the customers, their lawyers and funders stand to receive from the legal action.
ANZ responded straight after the lawyers made their settlement offer public on Wednesday, calling it a 'stunt intended to influence members of Parliament'.
'The litigation funders are worried that MPs have seen through their attempts to exploit a poorly drafted provision in the CCCFA and are desperate to shut down the strong public interest arguments in favour of the amendment,' ANZ said.
It said its disclosure error had seen it undercharge customers an average of $2 a month over 12 months.
'There is no consumer harm. ANZ wrote off the amount it was owed and therefore put customers in a better position than had the issue never happened,' ANZ said.
'The proposed settlement appears to be primarily driven by the financial interests of the litigation funders and the proposed resolution does not reflect the nature or scale of the underlying issue.'
The litigation funders, LPF Group, will take a cut of between 13% and 25% of the settlement.
Peters says litigation funders stand to make 'windfall gains'
On Wednesday the Herald reported that New Zealand First deputy leader Shane Jones expressed concern over the retrospective element of the proposed law change, saying his party would take advice before deciding whether to support the bill being passed into law in its current state.
However on Thursday, the party's leader Winston Peters defended Commerce and Consumer Minister Scott Simpson during question time in Parliament, saying the 2015 legislation was 'badly drafted' and litigation funders stood to make 'windfall gains' if the law wasn't changed.
Act leader David Seymour told the Herald his party supported the bill because it is a part of the Coalition Government.
However, he had written to Simpson asking how to respond to constituents concerned about the bill applying to the past.
'Who knows, maybe Scott will change his mind in response to this,' Seymour said.
Labour MP Arena Williams took aim at Simpson during question time on Thursday for getting a key detail of the proposed law change wrong during an interview on Newstalk ZB, and incorrectly saying the Government hadn't been lobbied by the banks on the matter.
She echoed an allegation made by the litigation funders that Simpson wasn't across the detail when he took the proposed law change to Cabinet, as he had only just been appointed Commerce and Consumer Affairs Minister following Andrew Bayly's resignation.
ASB and ANZ CEOs to be questioned by politicians
Coming back to ASB, it questioned the math behind the proposed settlement, saying it provided 'no certainty to ASB or other banks which may become subject to similar class actions, or to the sector as a whole'.
The customers' lawyers said $600m was equivalent to 3.5% of ANZ's profits between 2016 and 2019, and 5% of ASB's profits over this time.
They proposed the banks pay the lesser of $600m and 68% of the borrowing costs customers paid through the duration of the banks' breaches.
Under the existing law, the banks could be required to reimburse customers 100% of the borrowing costs they paid for the duration of the breaches.
If the law is changed, judges will be empowered to use their discretion to issue fair penalties. The starting point won't be the reimbursement of all borrowing costs.
Parliament's finance and expenditure committee is considering written and oral submissions from the public on the proposed law change.
ANZ's chief executive and general counsel, and ASB's chief executive and board chair are among those who will present to the committee on Monday.
The committee will also hear from various consumer groups and legal experts, among others.
Jenée Tibshraeny is the Herald's Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
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