The Government’s defending their move to change a law which protects Australian banks from Kiwi customers.
More than 15,000 mortgage holders could miss out on hundreds of millions in compensation for mistakes made by ANZ and ASB.
Commerce Minister Scott Simpson talks to Heather du Plessis-Allan about the proposal.
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Episode Transcript
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Speaker 1 (00:00):
Now the government's defending the move to change a law
which would protect Ossie banks from Kiwi customers. On the
show yesterday we spoke to Scott Russell. He's a lawyer
who's leading the class action of one hundred and seventy
thousand Kiwis against ASB and A and z.
Speaker 2 (00:13):
Aims in ASB is saying that generally's under the law
potentially presents an existential risk to the economy. What we're
saying is that's just simply rubbish. There's no evidence of that,
and it seems the suspicion is that by mending the
law it's just national helping out the Australian banks in
this case.
Speaker 1 (00:32):
Commo's Commission, Scot's Comma's Commission. Minister scottssoners with me right now.
I don't know why a we're calling you, that's Scott,
You're just a commerce minister. How are you?
Speaker 3 (00:41):
I'm all right? Thank you. Here the Friday afternoon, lots
of people heading to the coramandeler.
Speaker 1 (00:46):
I hope we'll put it down to the wrong. Now,
why are you siding with the banks against the customers?
Speaker 3 (00:52):
Well we're not. The banks aren't calling for this, and
that guy I just heard that replay Yesterday's completely wrong.
The banks aren't calling for this, the banks declared, and
they've already paid out thirty five million to those affected customers.
Now that's not the point. What we're trying to fix
here is some bad law to bring it into line
with actually the existing law. So a little bit of history.
(01:12):
Back in twenty fifteen, a strict liability offense was created
for lenders, and not just banks, for credit unions, for
building societies, for car finance dealers, you know, all that
sort of every kind of lender. The strict liability was
that if they made any mistake on their documentation at all,
no matter how minor, no matter how inoffensive, or whether
(01:35):
it had no impact at all on the lender, the
courts could only apply a strict penalty, and the strict
penalty was to refund all the interest and all the
fees relating to that loan. Now, if you've got a
twenty five year mortgage, that's a lot of interest and
a lot of fees over that period of design, is.
Speaker 1 (01:55):
It not in the affected period rather than over the
life of the whole loan. It's just in that period
where the information was incorrect.
Speaker 3 (02:02):
No The period that we're trying to fix is between
twenty fifteen and twenty nineteen. So by twenty nineteen, the
then Labor government had figured out that that was a
bad piece of law with really prescriptive and unintended consequences
of a magnitude that weren't anticipated when the law was
passed in twenty fifteen, so they fixed it in twenty nineteen,
(02:25):
which was a good thing. All we're trying to do
with this is to bring that period of time between
twenty fifteen and twenty nineteen. Now. I don't know why
Labour didn't fix it back to twenty fifteen at the time.
I suspect that there were no cases live then, so
they didn't, you know, there was sort of kind of
no reason. But what the issue is now is that
(02:46):
acts or omissions, no matter how minor or small, or
petty or inconsequential to the lender, the courts can only
give that penalty, which is refunding all interest in all payments.
So what we're trying to do is give the courts discretion,
as they currently have for post twenty nineteen cases, to
come to a fair and equitable judgment. We're letting the
(03:07):
courts decide that the courts are the right people, the
right place to decide what the appropriate penalty should be
and weighing up the will facts.
Speaker 1 (03:15):
So these errors are not altogether petty, though are they?
At least at least a couple of these errors from
Z and ASB have been reasonably significant in that they
have A and Z, for example, mislead customers as to
how much interest they would have to pay.
Speaker 3 (03:30):
That's right. So I'm not a lawyer. I'm not a lawyer,
and I'm not a judge. That's why I want to
give judges the opportunity to assess for themselves what the appropriate.
Speaker 1 (03:42):
People I understand something from you, Scott. In the when
the penalty is applied and all of the interests has
to be refunded, is it for the period of the
loan where the error was happening, let's say from twenty
fifteen to twenty sixteen, or is it for the period
of the entire loan.
Speaker 3 (03:58):
My understanding is it's for the period of the entire loan.
So that is the risk. Now, as I say, I'm
not a lawyer, but the advice I've had from MB
officials who are very concerned about this is that we
just need to bring the existing law. As I say,
it was fixed in twenty nineteen, So anything that happened
after twenty nineteen, the courts can make decision. It's just
(04:19):
instances that occurred between that period between twenty fifteen and
twenty nineteen now, so we're just trying to bring that
period into line with the existing law and the ability
of courts and judges to make decisions as they can today.
Speaker 1 (04:33):
What will it take the possible penalty from? And then two,
what is the possible penalty.
Speaker 3 (04:38):
At the moment? Well, the only penalty at the moment
for cases in that period of time is a refund
of all interests.
Speaker 1 (04:47):
Yes, I understand it's worth about ared a few hundred
million dollars.
Speaker 3 (04:50):
Yeah, well, there's been some estimates that it could be
several hundred million up to a billion. And the real
risk around that is not to the big banks. Actually
it's to the.
Speaker 1 (04:59):
Small Who's making these estimates.
Speaker 3 (05:02):
Well, MB advisors and you know they have been thinking
about this. And as I say, this was fixed in
twenty nineteen, so this is not a new issue. And
then what does it take it down for a while?
Speaker 1 (05:12):
So several hundred million up to a billion down.
Speaker 3 (05:15):
To what, Well, that will be a decision for the
courts to decide. All I'm hoping to do is give
the courts a discretion. They might decide it could be more,
but at the moment, the courts don't have any flexibility.
They can only impose one penalty, and I think it's
appropriate and fear that the courts make those decisions, not politicians.
Speaker 1 (05:36):
Lately, the court that this isn't the legislation for a reason.
I mean, the reason that the banks have to cough
up as much as we are telling them in this
legislation to cough up is because we want to keep
them honest, right, because they deal with huge amounts of
paperwork and you as a borrower, a MEAs borrow, I
don't read all that stuff. So it is I rely
on the fact that they going to be completely honest.
(05:57):
Given the fact that these guys make a billion dollars
plus every single year, the only way to keep them
honest is to have really big fines and penalties coming
at them. That's why it's in the legislation, isn't it.
Speaker 3 (06:09):
Well, that was why it was in the original legislation,
but by twenty nineteen the government of the day had
figured out that that wasn't enough discretion to give the courts.
It was too much of a place.
Speaker 1 (06:20):
Literally, why are you saying that some Why do you
need to do the same thing that labour did. Labor
may have made a massive mistake here by making life farting.
Speaker 3 (06:28):
Labor fixed it. Labor fixed it.
Speaker 1 (06:30):
Alternatively, Scott alternative view on it is that Labor gave
banks a free pass to behavior however they want with
their information.
Speaker 3 (06:38):
Well, no, because the penalties are still there. But it's
the courts that will decide the weight and the measure
of those penalties. I think that's where it should be done.
Let the judges decide.
Speaker 1 (06:50):
Well, I would argue that.
Speaker 3 (06:51):
I would argue it.
Speaker 1 (06:52):
I would argue that you're tying the judges hands as
much as previously. You're just tying it in a different
way by saying that the fees the findes have to
be proportionate to the lot. And in some cases these
people may say there's no loss.
Speaker 3 (07:03):
Well, if there's no loss, then that's a problem that
doesn't exist. Surely, that no loss.
Speaker 1 (07:09):
That's where you are not and that is where you
are wrong Scott, because in some cases there may not
be a loss, but there has to be a disincentive
to the banks, doesn't it. There has to be a
punishment for doing something they know they shouldn't do.
Speaker 3 (07:20):
Yeah, I completely agree with you, Heather, and that's why
I think it should be the courts and the judges
that make a balanced way to decision on what that
should be.
Speaker 1 (07:30):
I've just been told that the fine is actually for
the period of the breach, not the whole known so
are you sure about your facts here?
Speaker 3 (07:37):
But the KEP period of the breach is until it's corrected.
So if it hasn't been correct.
Speaker 1 (07:42):
I come on, that is a completely different thing. I mean,
if the breach has been for eighteen months, that is
vastly different. Reimbursing eighteen months worth of fees compared to
twenty five years worth of mortgage.
Speaker 3 (07:54):
Well, as I say, I'm not a lawyer, but you
are what I am so responsible for it. Yes, and
that's why I want to give the courts the discretion
to make an assessment that the courts can make based
on the facts of the case was entered to them.
Speaker 1 (08:09):
You just said to me before, at the very start
of this you said banks are not calling for this.
Have you met Have you met with any banks? Have
you met with a banker's association about this?
Speaker 3 (08:18):
I've met with the Bankers Association and they aren't calling
for it.
Speaker 1 (08:21):
They your predecessor, Andrew Bailey, who actually wrote this into
the changes, met with the Banker's Association or the banks
about this.
Speaker 3 (08:29):
I can't speak for Andrew. I've met with because Association.
They haven't met bs on that.
Speaker 1 (08:36):
Don't you, I mean, come off at Why would you
people be making this change if it wasn't for the
fact that the banks wanted it?
Speaker 3 (08:42):
Well, that's well, you might think that either. But I
take the view that the banks are entitled as our
credit unions, as our building societies, as our vehicle finance companies,
as are all lenders. I think that they should be
entitled to a fair and equitable judicial process, and I
want to give an opportunity for the judges to make
(09:02):
a decision about how impactful eras and omissions are, what
the impacts are for lenders, and what the appropriate penalties
should be.
Speaker 1 (09:10):
Scott, it's always good to talk to you, and I
really appreciate you spending as much time with us as
you have. Thank you for that. Scott, Simson Komus finished
the Minnesota For more from Heather Duplessy Allen Drive.
Speaker 3 (09:19):
Listen live to news talks the'd be from four pm weekdays,
or follow the podcast on iHeartRadio
Now the government's defending the move to change a law
which would protect Ossie banks from Kiwi customers. On the
show yesterday we spoke to Scott Russell. He's a lawyer
who's leading the class action of one hundred and seventy
thousand Kiwis against ASB and A and z.
Speaker 2 (00:13):
Aims in ASB is saying that generally's under the law
potentially presents an existential risk to the economy. What we're
saying is that's just simply rubbish. There's no evidence of that,
and it seems the suspicion is that by mending the
law it's just national helping out the Australian banks in
this case.
Speaker 1 (00:32):
Commo's Commission, Scot's Comma's Commission. Minister scottssoners with me right now.
I don't know why a we're calling you, that's Scott,
You're just a commerce minister. How are you?
Speaker 3 (00:41):
I'm all right? Thank you. Here the Friday afternoon, lots
of people heading to the coramandeler.
Speaker 1 (00:46):
I hope we'll put it down to the wrong. Now,
why are you siding with the banks against the customers?
Speaker 3 (00:52):
Well we're not. The banks aren't calling for this, and
that guy I just heard that replay Yesterday's completely wrong.
The banks aren't calling for this, the banks declared, and
they've already paid out thirty five million to those affected customers.
Now that's not the point. What we're trying to fix
here is some bad law to bring it into line
with actually the existing law. So a little bit of history.
(01:12):
Back in twenty fifteen, a strict liability offense was created
for lenders, and not just banks, for credit unions, for
building societies, for car finance dealers, you know, all that
sort of every kind of lender. The strict liability was
that if they made any mistake on their documentation at all,
no matter how minor, no matter how inoffensive, or whether
(01:35):
it had no impact at all on the lender, the
courts could only apply a strict penalty, and the strict
penalty was to refund all the interest and all the
fees relating to that loan. Now, if you've got a
twenty five year mortgage, that's a lot of interest and
a lot of fees over that period of design, is.
Speaker 1 (01:55):
It not in the affected period rather than over the
life of the whole loan. It's just in that period
where the information was incorrect.
Speaker 3 (02:02):
No The period that we're trying to fix is between
twenty fifteen and twenty nineteen. So by twenty nineteen, the
then Labor government had figured out that that was a
bad piece of law with really prescriptive and unintended consequences
of a magnitude that weren't anticipated when the law was
passed in twenty fifteen, so they fixed it in twenty nineteen,
(02:25):
which was a good thing. All we're trying to do
with this is to bring that period of time between
twenty fifteen and twenty nineteen. Now. I don't know why
Labour didn't fix it back to twenty fifteen at the time.
I suspect that there were no cases live then, so
they didn't, you know, there was sort of kind of
no reason. But what the issue is now is that
(02:46):
acts or omissions, no matter how minor or small, or
petty or inconsequential to the lender, the courts can only
give that penalty, which is refunding all interest in all payments.
So what we're trying to do is give the courts discretion,
as they currently have for post twenty nineteen cases, to
come to a fair and equitable judgment. We're letting the
(03:07):
courts decide that the courts are the right people, the
right place to decide what the appropriate penalty should be
and weighing up the will facts.
Speaker 1 (03:15):
So these errors are not altogether petty, though are they?
At least at least a couple of these errors from
Z and ASB have been reasonably significant in that they
have A and Z, for example, mislead customers as to
how much interest they would have to pay.
Speaker 3 (03:30):
That's right. So I'm not a lawyer. I'm not a lawyer,
and I'm not a judge. That's why I want to
give judges the opportunity to assess for themselves what the appropriate.
Speaker 1 (03:42):
People I understand something from you, Scott. In the when
the penalty is applied and all of the interests has
to be refunded, is it for the period of the
loan where the error was happening, let's say from twenty
fifteen to twenty sixteen, or is it for the period
of the entire loan.
Speaker 3 (03:58):
My understanding is it's for the period of the entire loan.
So that is the risk. Now, as I say, I'm
not a lawyer, but the advice I've had from MB
officials who are very concerned about this is that we
just need to bring the existing law. As I say,
it was fixed in twenty nineteen, So anything that happened
after twenty nineteen, the courts can make decision. It's just
(04:19):
instances that occurred between that period between twenty fifteen and
twenty nineteen now, so we're just trying to bring that
period into line with the existing law and the ability
of courts and judges to make decisions as they can today.
Speaker 1 (04:33):
What will it take the possible penalty from? And then two,
what is the possible penalty.
Speaker 3 (04:38):
At the moment? Well, the only penalty at the moment
for cases in that period of time is a refund
of all interests.
Speaker 1 (04:47):
Yes, I understand it's worth about ared a few hundred
million dollars.
Speaker 3 (04:50):
Yeah, well, there's been some estimates that it could be
several hundred million up to a billion. And the real
risk around that is not to the big banks. Actually
it's to the.
Speaker 1 (04:59):
Small Who's making these estimates.
Speaker 3 (05:02):
Well, MB advisors and you know they have been thinking
about this. And as I say, this was fixed in
twenty nineteen, so this is not a new issue. And
then what does it take it down for a while?
Speaker 1 (05:12):
So several hundred million up to a billion down.
Speaker 3 (05:15):
To what, Well, that will be a decision for the
courts to decide. All I'm hoping to do is give
the courts a discretion. They might decide it could be more,
but at the moment, the courts don't have any flexibility.
They can only impose one penalty, and I think it's
appropriate and fear that the courts make those decisions, not politicians.
Speaker 1 (05:36):
Lately, the court that this isn't the legislation for a reason.
I mean, the reason that the banks have to cough
up as much as we are telling them in this
legislation to cough up is because we want to keep
them honest, right, because they deal with huge amounts of
paperwork and you as a borrower, a MEAs borrow, I
don't read all that stuff. So it is I rely
on the fact that they going to be completely honest.
(05:57):
Given the fact that these guys make a billion dollars
plus every single year, the only way to keep them
honest is to have really big fines and penalties coming
at them. That's why it's in the legislation, isn't it.
Speaker 3 (06:09):
Well, that was why it was in the original legislation,
but by twenty nineteen the government of the day had
figured out that that wasn't enough discretion to give the courts.
It was too much of a place.
Speaker 1 (06:20):
Literally, why are you saying that some Why do you
need to do the same thing that labour did. Labor
may have made a massive mistake here by making life farting.
Speaker 3 (06:28):
Labor fixed it. Labor fixed it.
Speaker 1 (06:30):
Alternatively, Scott alternative view on it is that Labor gave
banks a free pass to behavior however they want with
their information.
Speaker 3 (06:38):
Well, no, because the penalties are still there. But it's
the courts that will decide the weight and the measure
of those penalties. I think that's where it should be done.
Let the judges decide.
Speaker 1 (06:50):
Well, I would argue that.
Speaker 3 (06:51):
I would argue it.
Speaker 1 (06:52):
I would argue that you're tying the judges hands as
much as previously. You're just tying it in a different
way by saying that the fees the findes have to
be proportionate to the lot. And in some cases these
people may say there's no loss.
Speaker 3 (07:03):
Well, if there's no loss, then that's a problem that
doesn't exist. Surely, that no loss.
Speaker 1 (07:09):
That's where you are not and that is where you
are wrong Scott, because in some cases there may not
be a loss, but there has to be a disincentive
to the banks, doesn't it. There has to be a
punishment for doing something they know they shouldn't do.
Speaker 3 (07:20):
Yeah, I completely agree with you, Heather, and that's why
I think it should be the courts and the judges
that make a balanced way to decision on what that
should be.
Speaker 1 (07:30):
I've just been told that the fine is actually for
the period of the breach, not the whole known so
are you sure about your facts here?
Speaker 3 (07:37):
But the KEP period of the breach is until it's corrected.
So if it hasn't been correct.
Speaker 1 (07:42):
I come on, that is a completely different thing. I mean,
if the breach has been for eighteen months, that is
vastly different. Reimbursing eighteen months worth of fees compared to
twenty five years worth of mortgage.
Speaker 3 (07:54):
Well, as I say, I'm not a lawyer, but you
are what I am so responsible for it. Yes, and
that's why I want to give the courts the discretion
to make an assessment that the courts can make based
on the facts of the case was entered to them.
Speaker 1 (08:09):
You just said to me before, at the very start
of this you said banks are not calling for this.
Have you met Have you met with any banks? Have
you met with a banker's association about this?
Speaker 3 (08:18):
I've met with the Bankers Association and they aren't calling
for it.
Speaker 1 (08:21):
They your predecessor, Andrew Bailey, who actually wrote this into
the changes, met with the Banker's Association or the banks
about this.
Speaker 3 (08:29):
I can't speak for Andrew. I've met with because Association.
They haven't met bs on that.
Speaker 1 (08:36):
Don't you, I mean, come off at Why would you
people be making this change if it wasn't for the
fact that the banks wanted it?
Speaker 3 (08:42):
Well, that's well, you might think that either. But I
take the view that the banks are entitled as our
credit unions, as our building societies, as our vehicle finance companies,
as are all lenders. I think that they should be
entitled to a fair and equitable judicial process, and I
want to give an opportunity for the judges to make
(09:02):
a decision about how impactful eras and omissions are, what
the impacts are for lenders, and what the appropriate penalties
should be.
Speaker 1 (09:10):
Scott, it's always good to talk to you, and I
really appreciate you spending as much time with us as
you have. Thank you for that. Scott, Simson Komus finished
the Minnesota For more from Heather Duplessy Allen Drive.
Speaker 3 (09:19):
Listen live to news talks the'd be from four pm weekdays,
or follow the podcast on iHeartRadio
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