The Credit Contracts and Consumer Finance Act 2003 (CCCFA) exists to protect the interests of customers in connection with credit contracts such as home and personal loans and requires creditors 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, creditors are required to provide customers with certain information when they borrow money or make changes to their existing loans. The Act incentivises creditors to provide this information as and when required by providing a number of consequences of failing to do so.
The specific sections of the CCCFA that the plaintiffs in the Banking Class Action allege ANZ and ASB have not complied with are set out below.
Section 22: VARIATION DISCLOSURE
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
The plaintiffs in the Action allege that both ANZ and ASB failed to provide certain 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 compliant 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.
Section 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 only applies to Loans entered into after 6 June 2015
The plaintiffs in the Class Action say that the effect of both sections 99(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.
New section 95A, which provides 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. Both Banks have applied for such relief.
S99(1A) has been subject to considerable debate. Click here to understand more
Section 48: RECOVERY OF PAYMENTS
Under section 48, if a creditor receives interest and fees it is not entitled to, 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.
Section 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.
Section 88: STATUTORY DAMAGES
Under section 88, if a creditor breaches s 22, the affected borrower is entitled to the statutory damages of up to $3,000 or $6,000, depending on whether their Loan was entered into before or after 6 June 2015, when the CCCFA was amended.
The plaintiffs in the Action seek orders requiring the Banks to pay statutory damages to affected customers. (But only if the orders sought under section 94 are not made.)
ANZ and ASB deny the allegations against them, dispute the plaintiffs’ interpretations of the relevant provisions of the CCCFA and have raised affirmative defences. The plaintiffs’ amended statement of claim and Banks’ statements of defence can be accessed here.