New Zealand financial services regulator the Financial Markets Authority (FMA) has launched civil action against ASB Bank for its alleged failure to hand on promised policy discounts and fee exemptions to customers on its insurance and banking products.

More than 25,000 customers were affected by the issues, with “poor systems and controls [leading] to millions of dollars in financial harm to [ASB] customers for more than a decade”, said FMA head of enforcement Margot Gatland.

The FMA, in a filing to the High Court of New Zealand, alleges that the bank, owned by Australian big four CBA, misapplied promised multi-policy discounts on ASB-branded insurance products – an issue that was found to date back to 2009.

The misapplication of discounts arose due to errors in the manual process undertaken by ASB staff at the point of sale for these insurance products, the FMA alleges.

A sub-issue also arose with ASB staff misinforming customers with insurance policies for caravans and trailers that they were eligible for the multi-policy discount, despite such policies not being eligible.

More than 23,000 customers were affected by the multi-policy discount issue between April 2014 and May 2022. The total value of overcharged premiums was approximately $2.8 million.

The FMA’s second cause of action relates to ASB’s failure to consistently apply fee exemptions to certain customer accounts with access to ASB’s Fastnet online banking service, specifically: Society Cheque (designed for not-for-profits), Education Administration (designed for schools), and Business Focus accounts.

As with the multi-policy discount issue, the FMA alleges the failures arose due to errors in manual processing undertaken by ASB staff, with the regulator contending that the bank “did not have adequate systems in place to check that the fee exemptions were being applied correctly”. The Fastnet Banking issue was found to have begun in 2011.

More than 2,435 customers were affected by the bank’s failure to apply promised Fastnet Banking fee exemptions, totalling approximately $1.15 million in overcharges.

While Gatland acknowledged the bank’s efforts to remediate the issues and repay affected customers, the regulator took issue with the length of time it took to identify and resolve the mistakes.

This delay, Gatland said, “was pertinent to the FMA’s decision to file civil court action”.