ASB warned over responsible lending failures

by Roxanne Libatique19 Jun 2021

The Commerce Commission has warned ASB Bank Limited (ASB) over responsible lending failures, with customers overcharged Early Repayment Adjustment (ERA) fees.

ASB identified the calculation errors and reported to the Commission, confirming over 48,000 ERA fees overcharged for borrowers who had terminated their fixed-rate term loans early between April 2005 and December 2016.

The bank also confirmed that nearly early 11,000 ERA fees were undercharged. Of the affected loans, the majority were home loans, with a small number being business loans, asset finance, commercial, personal, and rural loans.

According to the Commission, ASB has likely breached its obligations under the Credit Contracts and Consumer Finance Act (CCCF Act) by failing to act with care, diligence, and the skill of a responsible lender. It also claimed that the bank breached the Fair Trading Act (FT Act) by making false or misleading representations of its right to charge the incorrect ERA fees.

ASB has agreed to repay around $8.9 million to affected borrowers and has provided the Commission with enforceable undertakings, explaining how it will locate affected customers and make the refunds due to them. The affected customers will also receive the difference between the amount that they should have been charged and the amount that ASB actually charged them, together with interest.

“ASB accepts that it likely breached some of its obligations under the CCCF Act when it charged ERA fees that had not been accurately calculated. The Commission also considers that it likely breached the FT Act by representing that it had a right to charge that fee when in fact, it exceeded the fee that ASB was contractually entitled to charge,” said Commission chairperson Anna Rawlings.

ASB began repaying customers in July 2020 and has already repaid a significant proportion of the $8.9 million to affected borrowers.

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