1. News
  2. Media releases
  3. Settlement reached over ASB rural interest rate swaps

Settlement reached over ASB rural interest rate swaps

 

Media release
MR No. 2015 – 026
22 June 2015

The Financial Markets Authority (FMA) has reached a settlement with ASB regarding the sale, promotion and marketing of interest rate swaps to some rural customers.                                                                   

The Commerce Commission (the Commission) investigated ASB for the sale of interest swaps and reached a separate settlement with ASB in December 2014.

The FMA settlement was reached based on the conclusions from the Commission’s investigation and the FMA’s engagement with ASB in relation to its processes for selling and marketing interest rate swaps to rural customers.

Under the Financial Markets Conduct Act 2013, from 1 April 2014 the FMA has responsibility for regulating misleading and deceptive conduct in relation to any dealing in financial products or services. The FMA’s settlement with ASB focuses on the regulator’s expectations for ASB’s future conduct and processes around its sales practices. The activity investigated by the Commission took place before April 2014.

As part of the FMA settlement agreement, ASB has agreed to appoint an independent third-party to review its sale, promotion and marketing of two sample products being interest rate swaps and term funds.

The report from a third-party will be provided to ASB and then to the FMA. Following consultation with the FMA, ASB will implement the required recommendations in the review.

ASB has said it does not accept the conclusions from the Commission’s investigation, but has admitted that some of its conduct breached section 9 of the Fair Trading Act in relation to some of its rural customers.

The FMA did not carry out a separate investigation in this case.  However, as a consequence of the Commission’s conclusions, the FMA had concerns about potentially misleading conduct by ASB, relating to the sale and marketing of interest rate swaps to some rural customers.

The FMA acknowledges that neither its concerns nor the Commission’s conclusions have been tested in Court.

The FMA’s General Counsel, Liam Mason, says consumers are entitled to receive full and accurate information when purchasing financial products or services.

“One of the FMA’s strategic priorities is to ensure that sales processes and advice services reflect the best interests of customers. This settlement recognises our concerns about the imbalance of information that can exist between customers and financial service providers.”

“The review will also help to ensure robust sales and advice processes are in place, including the disclosure of all relevant information, and that they meet the standards of the new regulatory framework,” he said.

This is the third and final settlement the FMA has reached regarding rural interest swaps.

The settlement agreement is available here

ENDS

Notes:
Under the settlement with the Commerce Commission, ASB agreed to make $2.7m available for payment to the eligible customers who registered their complaints with the Commission. That payment process is due to be completed shortly.

ASB also agreed to pay $250,000 towards the Commission’s costs and another $250,000 to Dairy Women’s Network, a charitable trust.

Contact:

Shae Skellern
09 300 0465
021 847 192
Shae.skellern@fma.govt.nz