Bryce Edwards
Director of the Integrity Institute
Banks in New Zealand have some of the most powerful lobbyists, and we are currently witnessing an illuminating example of how they get their way, with the government introducing retrospective legislation to help two big banks stymie a class action lawsuit from its customers.
The coalition government is moving to change the law in a way that could let ANZ and ASB off the hook for hundreds of millions of dollars in compensation owed to customers. In a surprise move, parliament is considering a retrospective amendment to the Credit Contracts and Consumer Finance Act (CCCFA) that will apply back to 2015, effectively shielding the banks from an ongoing class-action lawsuit.
As NZ Herald journalist Jenée Tibshraeny has reported, this legislative tweak “could see more than 150,000 mortgage holders miss out on hundreds of millions in compensation for mistakes made by ANZ and ASB” – see: Consumer finance law change could quash huge class action against ANZ and ASB banks (paywalled)
The timing and targeting of the change have raised alarm bells – it appears to be the direct result of sustained lobbying by the banking sector, done behind closed doors and now bearing fruit in our law books.
Observers note that the banks have been working to erode this consumer protection for years. Financial journalist Jenny Ruth pointed out last year that major banks had already succeeded in watering down the CCCFA penalty in 2019 – a change that gave courts discretion to reduce the harshest refunds for rule-breaking lenders: “The major banks have already succeeded in reducing the burden for future booboos,” Ruth wrote wryly, explaining that originally the act ensured lenders would forfeit all interest and fees for any period they failed to disclose required information – see: Will this government protect major banks, not consumers’ interests? (paywalled). See also Ruth’s latest Substack column on this: Why does the govt want to protect two Aussie banks from their own failures? (paywalled).
According to an MBIE discussion paper, that 2015 provision was meant “to ensure lenders do not profit from… incomplete information”. But after vigorous banking industry complaints about the risk of “onerous” liabilities, the law was softened in 2019 to allow relief if forfeiting all interest was “disproportionate to the seriousness of the breach”. In other words, the banks have been chipping away at this law from the start, lobbying to limit their exposure. Now, with a massive class action looming, they seem to have pressed their advantage to get the ultimate prize: a retroactive get-out-of-jail card.
It’s not hard to see the fingerprints of lobbying. The Banking Ombudsman hasn’t cried out for this change, nor have ordinary consumers. The loudest voices have been the banks themselves – through industry submissions and private meetings – arguing that being forced to refund years of interest to wronged customers would be unfair or destabilising.
According to Scott Russell, the lawyer leading the class action, “the banks themselves have admitted this case poses no material risk to them, yet they’ve clearly lobbied successfully behind closed doors for legislation” to strip away consumers’ rights – see: Government’s Retrospective Law Change Threatens Consumer Protections
Indeed, the government’s own stated rationale is straight from the banking lobby’s playbook: Commerce Minister Scott Simpson says he wants lenders not to be “disproportionately punished” for technical breaches and worries tough penalties might make banks too cautious to lend.
This framing conveniently echoes the banks’ talking points – casting full compensation for customers as an excessive ‘punishment’ of the poor banks. Never mind that ANZ and ASB’s Australian parent companies are hugely profitable corporates: the narrative sold is that New Zealand’s credit market might somehow suffer if big banks are held fully accountable for past misconduct.
One cannot ignore the political heft of the banking industry behind this. ANZ and ASB are among the country’s largest financial institutions, and their influence reaches into the halls of power. It certainly didn’t hurt their cause that former Prime Minister John Key has been the chairman of ANZ, the very bank most exposed in this lawsuit. As business journalist Rob Stock dryly noted in 2021, it was ironically “the National government led by Sir John Key” that in 2015 put in place the tough CCCFA clause now at issue – see: How banks tried to shut down multi-million dollar legal threat, but failed
That law was designed to stop predatory lending by making lenders refund all charges during any period they weren’t playing by the rules. Yet John Key’s own bank now faces that exact sanction – a twist of fate that the current National-led government seems keen to undo. The optics are not good: a former PM helmed the bank, and his party (back in power) rides to the rescue with a law change. Of course, Key then stood down from chairing ANZ last year. Nonetheless, whether Key had any direct hand in this policy, the perception of a revolving door payoff is hard to ignore.
Undermining the rule of law with retrospective legislation
Beyond the lobbying and optics, legal experts are aghast at the rule-of-law implications of this move. Under basic democratic principles, laws should not be written to retroactively cancel rights or liabilities after the fact – especially not to benefit a powerful defendant in an active court case. The New Zealand Centre for Public Law has advised against this, warning that changing the legal status of past conduct undermines certainty and is inherently unfair: “It is generally accepted that legislation should be forward-looking in its effect.” People (and companies) should be able to trust that the laws in place when an action occurs will govern the consequences, rather than having parliament swoop in years later to rewrite the rules.
Yet that’s exactly what’s happening. The government’s bill explicitly reaches back to mid-2015 to cover the period of ANZ and ASB’s admitted disclosure breaches. It is, in essence, a custom-made legislative pardon for the banks’ past infractions, delivered after the case has already been in court for years. The class action was filed in 2021 and has slowly worked its way through procedures – with the Supreme Court even allowing it to cover all affected customers automatically (an opt-out class action) given the widespread impact.
Now, on the eve of a substantive hearing, politicians are intervening to pull the rug out. “This amendment represents unprecedented political interference with the judicial process,” says lawyer Scott Russell, calling it “changing the rules mid-litigation” to favour the defendants.
Such an intervention is highly unusual in New Zealand’s legal history. Even Commerce Minister Simpson’s predecessor, National MP Andrew Bayly, had publicly promised last year that no retrospective changes were being considered for the CCCFA. (At the time, Bayly’s assurances suggested the government knew crossing the retroactivity line would spark outrage.)
Yet after Bayly’s sudden resignation in February, his replacement wasted no time in doing exactly what was ruled out – adding a retroactive clause in the March 2025 policy draft. No clear justification has been offered for this backtrack, aside from nebulous appeals to “balance” and preventing an overly “risk-averse” lending environment.
Let’s call this what it is: a rule-of-law rollback for the sake of two banks’ bottom lines. When laws are rewritten to nullify ordinary citizens’ legal claims – after those claims have been filed and are before the courts – it strikes at the heart of judicial integrity. The courts exist to apply the law impartially and resolve disputes. If a well-connected litigant can get the legislature to retroactively rewrite the law in their favour, how can the public have confidence in the independence of justice?
As Russell puts it, “passing retrospective legislation like this makes New Zealand look weak” – it signals that the government “is prepared to bow to corporate interests rather than protecting ordinary New Zealanders”. The discriminatory nature of this amendment is also clear: it is targeted to benefit two specific actors, ANZ and ASB, in their specific court case. By MBIE’s own admission, there are no other known cases that would be affected. This isn’t a broad policy change being applied generally – it’s a tailor-made fix for the banks, legislation with an astoundingly narrow beneficiary.
Such pinpoint lawmaking erodes the principle that everyone is equal before the law. If everyday New Zealanders were suing a company and found the Government changing the law to nullify their case, would we accept it? Or if a small business tried to escape liability to customers by lobbying for a law change just for them, would it be tolerated? The outrage would be swift. Yet in this case, the beneficiaries are Australia’s largest banks, and so far the issue has flown under many voters’ radar.
A case study in political influence and power imbalance
This saga is shaping up to be a case study in how political influence is wielded by powerful industries in New Zealand. The banking sector has flexed its muscle – subtly and not-so-subtly – and the government has largely capitulated. Consider the sequence of events: ANZ’s coding error and ASB’s disclosure failures (from 2015 onward) came to light years ago. Both banks admitted they broke the rules and paid voluntary compensation (around 35 million dollars by ANZ and eight million dollars by ASB) to affected customers.
Notably, those payouts were just a fraction of what full compliance with the law might require – as Jenny Ruth observed, if the strict letter of the CCCFA had been enforced, “the compensation each bank would have had to pay would be several magnitudes higher”. The Commerce Commission, for reasons unknown, chose to settle with the banks under a different part of the law, avoiding the big-stick penalty clause. But that remaining big stick – the class action seeking the full measure of redress – still loomed.
From the moment that class action was filed, it appears the banks and their allies went to work. They attempted legal challenges (ASB even tried to appeal the lawsuit’s certification), and when those failed, they turned attention to the political arena. It’s telling that the Ministry of Business, Innovation and Employment (MBIE) echoed banks’ concerns in its advice, worrying that large refunds could “threaten effective and competitive supply of credit” in the long term.
The spectre of “credit supply” is a classic lobbying scare tactic – implying that if banks are held accountable, they might cut off lending and harm the economy. In reality, ANZ and ASB’s parent companies make multi-billion-dollar profits and could absorb losses if required. But by raising the bogeyman of broader economic impact (and especially invoking sympathy for “smaller lenders” as political cover), the banks built their case that what’s good for them is good for New Zealand. This is trickle-down accountability – the idea that you can’t enforce the law too strongly on big banks or else everyone might suffer. It’s a narrative of convenience that has unfortunately found a willing audience in the Beehive.
Journalists have not been fooled by this narrative. Writing about this in the NBR Tim Hunter has described the amendment plainly as a “pro-bank Bill”, noting its retrospective measure “looks designed to help ANZ and ASB defend a customer class action” – see: There’s a bigger picture in the pro-bank bill (paywalled)
While Hunter also acknowledges the issue isn’t completely black and white – there are nuances about proportional penalties and unintended consequences – he doesn’t deny the clear beneficiary of the change: the banks facing litigation.
Meanwhile, other business columnists have been scathing. Jenny Ruth didn’t mince words about Minister Bayly’s priorities, quipping, “Bayly’s heart may bleed for ANZ and ASB, but mine certainly doesn’t.” She noted that even regulators observed how “banks only began taking their disclosure obligations seriously when a significant penalty…was introduced”, making the point that “it takes the threat of a big stick to get the major banks to take their obligations seriously”. In other words, if you remove that stick, what incentive will big banks have to follow the rules? This is exactly why consumer advocates are worried. The retrospective law change not only deprives the current plaintiffs of justice but it potentially signals to large financial institutions that they needn’t fear meaningful consequences in the future either. The precedent being set is that if penalties bite too hard, the law can be changed after the fact to bail you out.
It’s hard to imagine a starker example of policy making seemingly catered to elite interests over ordinary citizens. The 150,000+ everyday New Zealanders affected by the banks’ breaches had a reasonable expectation that the law, as written, entitled them to recompense. They likely had no idea such a remedy even existed until the class action made it viable. Individually, no single customer would ever have the resources to take on the banking giants – but collectively, through the class action, they at least had a fighting chance to get what the law promised them.
Now, that chance is evaporating, not in a courtroom on the merits of the case, but in a parliamentary backroom via a hastily added clause. It’s a cynical end-run around justice. Even if one sympathises with the argument that the law was too harsh on lenders, the proper time to change it is before – not after – such large-scale breaches occur and are subject to legal action. Changing it now, with the effect of extinguishing the claims of those already wronged, reeks of bias toward corporate interests.
Eroding trust: Why this matters for democracy
The implications of this episode go well beyond this one lawsuit or the banks involved. Public trust in our political system is at stake. When people see the government seemingly bend over backwards to protect powerful banks from accountability, it shows that political influence is for sale and that there’s one rule for the rich and another for the rest. Favouritism is in action, rather than the rule of law and basic fairness.
This retrospective CCCFA amendment sets a dangerous precedent. If it goes through, what’s to stop other large companies caught in lawsuits from lobbying for a special law change to rescue them as well? It puts us on a slippery slope where legislation can be used as an escape hatch for those with the clout to obtain it. Today it’s the banks; tomorrow it could be any other industry heavyweight. The integrity of our legislative process suffers when laws appear to be custom made for mates. Even if done with the stated best intentions, it creates an impression of democracy derailed by insider influence.
As I’ve often highlighted before, the nexus between money and politics is particularly strong in New Zealand. Here we have a textbook case: a well-resourced sector facing legal consequences, and a government amenable to intervening on its behalf after extensive lobbying. The democratic process is supposed to serve the public interest, not just the interests of the powerful.
The backlash from journalists and civic advocates over this bank-friendly law change is a healthy sign. It shows that not everyone is content to let such moves slip by unchallenged. As voters and citizens, we should ask pointed questions: Who really benefits from this law change? Why was it prioritised and fast-tracked? How does it align with the principles of justice we expect our lawmakers to uphold?
In the end, this controversy is about more than one amendment or one class action. It’s a stark reminder of the imbalance of power that can infect policy making. Banks have teams of lobbyists and easy access to ministers: ordinary consumers do not. If this amendment proceeds, it will stand as a monument to that imbalance – a law that visibly puts elite corporate interests over the rights of everyday people. Such an outcome risks breeding further cynicism and disengagement among the public. After all, if the deck is stacked for the big players no matter what the law says, why should people trust in the system?
New Zealand’s leaders would do well to reconsider this path. The cost of undermining the rule of law and public trust far exceeds any transient relief it grants to ANZ and ASB’s balance sheets. In a democracy worthy of the name, justice isn’t something to be retroactively negotiated under lobbying pressure. It is upheld impartially, come what may, even if that means making powerful banks finally face the music for their mistakes.
For the latest articles on this story, see:
Tim Hunter (NBR): There’s a bigger picture in the pro-bank Bill (paywalled)
Tim Hunter (NBR): Lawyer slams ‘political interference’ in bank class action (paywalled)
Jenny Ruth: Why does the govt want to protect 2 Aussie banks from their own failures? (paywalled)
Jenée Tibshraeny (Herald): Consumer finance law change could quash huge class action against ANZ and ASB banks (paywalled)
Rob Stock (Post): Lawyer slams Government planned law change to protect banks (paywalled)
The website for the Banking Class Action: https://www.bankingclassaction.com/
See also the relevant entries in The Integrity Institute’s “NZ Lobbying & Influence Register”:
This article was originally published by the Integrity Institute.
