ASB Admits Responsible Lending Failures And Agrees To Pay Customers $8.1m

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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