ASB and ANZ have rejected an offer to settle a class action law suit for breaches of historic credit disclosure laws.
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A top lawyer working with the plaintiffs in a large-scale banking class action is calling for a formal investigation into “serious civil service process failures” by Ministry of Business, Innovation and Employment officials.
Rachael Reed, KC, has written to Public Service Commissioner Sir Brian Roche and Attorney-General Judith Collins.
She said she was concerned about how the Reserve Bank’s risk assessment, which suggested a $12.9 billion risk to the banking system if changes were not made retrospectively to the Credit Contracts and Consumer Finance Act, was being represented to Parliament’s Finance and Expenditure Committee.
The Credit Contracts and Consumer Finance Amendment (CCCFA) Bill, which is before select committee, includes a retrospective fix that would mean instead of lenders being required to pay back all interest and fees charged when there was a disclosure breach between 2015 and 2019, a court would be allowed to decide what compensation was “just and equitable”.
“The RBNZ modelling as it has been presented is not just based on unrealistic scenarios; it appears to be a mathematical impossibility,” Reed said.
“It also appears to have been accepted as fact that there is $12.9 billion potential exposure to the NZ banking sector. Yet, ANZ and ASB have publicly rejected settlement offers of $300 million as excessive. These two banks represent half the market, meaning the remaining sector is supposedly carrying $12.3 billion in exposure. It defies logic and credibility.”
Some members of the committee seemed to have accepted the figure without scrutiny, she said.
Reed said an investigation should determine whether Ministry of Business, Innovation & Employment officials complied with established standards of policy advice, consultation and transparency in the use of the Reserve Bank scenario, and MBIE’s subsequent recommendation to the minister and Cabinet.
It should also examine whether the analysis provided an adequate basis for asserting a risk to the New Zealand financial markets that justified retrospective legislation affecting tens of thousands of consumers by expressly targeting the class action against ANZ and ASB, she said.
She told Collins: “I appreciate you are well aware, retrospective legislation is an extraordinary use of extraordinary power that inherently undermines the rule of law. It should only be used where the foundation is transparently justified and unassailable.
“The evidence demonstrates that MBIE officials have failed to provide such a foundation, instead relying on an incomplete and demonstrably flawed analysis.
“This matter goes to the heart of our constitutional system – the integrity of the judicial process, the separation of powers, and the rule of law principles that underpin our democracy. The depth of these process failures, combined with their impact on democratic decision-making and the legal rights of tens of thousands of New Zealanders, requires your urgent attention to ensure New Zealand’s constitutional standards are maintained.”
Andrew Hume, general manager of commerce, consumer and business policy at MBIE, said the ministry was satisfied with the quality of advice provided on the retrospective changes.
“Although MBIE was not actively considering retrospective change when it undertook public consultation in 2024, some submitters raised concerns about the potential impact of historical disclosure breaches on lenders and the credit market.
“MBIE felt it appropriate to investigate these concerns. Our analysis is outlined in full in our Regulatory Impact Statement. I acknowledge that MBIE’s consultation on this matter was constrained by commercial sensitivities for lenders, and the active litigation underway.
“Final decisions were made by Ministers and Cabinet. The bill is currently before Select Committee for consideration.”
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