ASB Admits Responsible Lending Failures And Agrees To Pay Customers $8.1m Following A Commission Investigation

ASB Bank Limited (ASB) has entered into a settlement with the Commerce Commission after admitting it failed to ensure its systems and processes were sufficient to ensure that required information was given to more than 73,000 home and personal loan customers who made certain changes to their loans.

It has agreed to repay $8.1 million to customers who may have been affected by breach of its lender responsibilities under the Credit Contracts and Consumer Finance Act (CCCF Act).

The self-reported error occurred when the bank’s standard operating procedure was not consistently followed for customers making changes to the relevant repayment date, amount and frequency of their existing loan agreements either in branch or over the phone. This meant that some customers may not have been given information about these changes when variation disclosure was required by the CCCF Act.

“Lenders must exercise the care, diligence and skill of a responsible lender in all their dealings with borrowers. In this case ASB’s responsible lending failures had the potential to affect a large number of borrowers entitled to receive key information when they made changes to their loans, including information about how the change impacted their overall obligations under their loans,” said Commission Chair Anna Rawlings.

“Lenders need not only to make sure that they understand their obligations under the CCCF Act, but also that they have robust internal processes in place to meet those obligations.”

A copy of the settlement agreement can be found on the Commission’s website.

Background

Variation disclosure
Variation disclosure is key information that lenders must give to borrowers when they make changes to an existing loan, such as repayment dates, repayment amounts and frequency of payments. It helps borrowers understand the impact of the change in relation to their obligations under the loan contract.

Lender obligations
Lenders entering into or varying consumer credit contracts after 6 June 2015 are required to comply with the lender responsibility principles, as set out in the Credit Contracts and Consumer Finance Act.

The lender responsibility principles require lenders to exercise the care, diligence, and skill of a responsible lender always, including during all subsequent dealings with borrowers and guarantors.

They must also treat borrowers reasonably and with respect.

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