The Credit Contracts & Consumer Finance Act 2003 (CCCFA) exists to protect the interests of customers in connection with credit contracts such as home & personal loans and requires lenders to act responsibly and fairly at all times.
When you borrow money, the CCCFA ensures you are able to make informed choices, know what you are agreeing to, and can keep track of your debts.
Under the CCCFA, there are certain things lenders have to tell you when you borrow money. This is called disclosure of information. There are various consequences for lenders of failing to comply with their disclosure obligations.
Outlined below are the specific sections of the CCCFA which the plaintiffs allege ANZ and ASB have not complied with, and which this legal action seeks to hold them to account for.
S 22: DISCLOSURE OF AGREED CHANGES
Under section 22 of the CCCFA, if a creditor makes an agreed change to a loan that is a “consumer credit contract” (as defined in the Act) (Loan), it must ensure that it provides the borrower with disclosure of the full particulars of the change within prescribed time frames (Variation Disclosure).
This disclosure is important to ensure borrowers are able to make informed choices, know what they have agreed to and can keep track of their debts
It is alleged that both ANZ and ASB failed to provide customers who made changes to their Loans during the ANZ and ASB Relevant Periods with Variation Disclosure in relation to those changes.
ANZ sent customers Loan Variation Letters which were intended to provide Variation Disclosure, but contained inaccurate information. ASB failed to have processes and procedures in place to ensure that all of its customers received Variation Disclosure.
The plaintiffs say that where ASB did provide customers with some information in relation to changes (for example, in emails or letters) that information did not comply with s 22 and therefore did not constitute Variation Disclosure.
The plaintiffs in the Action say that, to date, neither ASB nor ANZ has provided affected customers with Variation Disclosure in relation to changes made their Loans during the Relevant Periods. Accordingly, the Banks are still in breach of s 22.
S 99: ENFORCEMENT OF CONSUMER CREDIT CONTRACT PROHIBITED
Section 99 provides strong incentives for creditors to comply with their disclosure obligations.
Section 99(1) states that:
if disclosure is required under section 22, a creditor cannot enforce the relevant Loan before that disclosure is made (i.e. between the date on which Variation Disclosure was required to be provided and the date on which it is in fact provided).
Section 99(1A) states that:
borrowers are not liable for interest and fees on a Loan in relation to any period during which the creditor is in breach of section 22 (i.e. between the date on which Variation Disclosure was required to be provided and the date on which it is in fact provided).
Whereas generally speaking section 99(1) applies in relation to all Loans entered into after 1 April 2005, section 99(1A) is newer and may only apply to Loans entered into after 6 June 2015
The plaintiffs in the Class Action say that the effect of both sections, s99(1) and (1A) is that such customers were and are not liable to pay the costs of borrowing on their Loans relating to any periods during which the Banks were or are in breach their section 22 obligations. The relevant periods will differ for each affected customer. Generally, a relevant period will begin on the day that the customer first made a change to their Loan and end either: (i) on the day that their Loan was repaid; or (ii) the date on which the customer’s claim against their Bank is resolved (whether through judgment or settlement).
New provisions which provide creditors with the ability to seek relief from the effects of section 48 or section 99(1A) came into effect on 20 December 2019. The Banks can apply for relief in relation to breaches of section 22 that occurred before 20 December 2019, but only in relation to costs of borrowing incurred after 20 December 2019.
S99(1A) has been subject to considerable debate. Click here to understand more
S 48: RECOVERY OF PAYMENTS
Under section 48, if a creditor receives interest and fees it is not entitled to by virtue of section 99, it must refund or credit those amounts to the borrower as soon as reasonably practicable.
The plaintiffs in the Action say that the effect of section 99 is that the Banks were not entitled to receive any costs of borrowing on affected Loans relating to any periods they were in breach of section 22. According, they are required under section 48 to refund or credit those amounts to the affected customers as soon as practicable. As neither Bank has done that, they are both currently in breach of section 48.
S 94: COURT ORDERS
The plaintiffs in the Banking Class Action say that both Banks have breached (and are currently in breach of) sections 22 and 48. They seek orders from the High Court requiring the Banks to refund or credit to all affected customers the interest and fees they have paid on their Loans in relation to periods during which the Banks were in breach of section 22.
While new s94 provisions came into effect on 20 December 2019 providing the ability for the lender to apply to the Court to have the effect of s48 or S99(1A) extinguished or reduced if the court considers it just and equitable, these provisions are not retrospective and therefore do not apply to ANZ or ASB for the ongoing breach of both s22 and s48.