In Australian Securities and Investments Commission v Australia and New Zealand Banking Group Limited [2018] FCA 155 the Federal Court published its findings and reasons for ordering ANZ to pay a penalty of $5 million for breaches of the responsible lending provisions of the National Credit Act by its former car finance business, Esanda. Background

The hearing judge considered the penalties imposed in Make It Mine Finance Pty Ltd in the matter of Make It Mine Finance Pty Ltd (No 2) [2015] FCA 1255, Australian Securities and Investments Commission v The Cash Store Pty Ltd (in liq) (No 2) [2015] FCA 93, Australian Securities and Investments Commission v Channic Pty Ltd (No 5) [2017] FCA 363, Australian Securities and Investments Commission v Wealth & Risk Management Pty Ltd (No 2) [2018] FCA 59 and the Full Court decision in Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2017] FCAFC 159.

But he rejected the penalties imposed in those cases because of the size of ANZ and the different facts.

He set out his reasons as follows:

“Looking then to the circumstances confronting the Court in determining penalties, there are 24 contraventions in total. However, for each of the relevant contracts, the “particular conduct” giving rise to the contravention of s 128(a) and (d) is the same as that giving rise to the contravention of s 130(1)(c). Whether by operation of the common law, or as a result of the operation of s 175 of the Act, ANZ should be liable to be ordered to pay a pecuniary penalty only in respect of one contravention for each of the relevant contracts.

The maximum penalty for each contravention is $1.7 million. Thus, the total possible penalty is $20.4 million.

A total penalty of $5 million has been proposed by the parties, and is in my view appropriate, for the following main reasons:
(1) ANZ did not completely fail to take steps to verify the financial situation of the consumers. However, to verify the income of the consumers, it inappropriately relied entirely on payslips received from the intermediaries. The conduct, independently of other factors, warrants a penalty towards or around the middle of the range for each contravention (around $10.2 million in total).

(2) ANZ’s co-operation, and the operation of the “totality principle”, should be recognised, which ASIC accepted warranted a further reduction to $5 million.

(3) A total penalty of $5 million is sufficient as a deterrent, and ensures that the penalty for contravening the Act is not seen as a “cost of doing business”.

On the one hand, the contraventions represent significant failures to comply with ss 128 and 130(1)(c), and by reason of the following matters, they warranted significant penalties:
(1) most importantly, the need for general deterrence, in circumstances where ANZ is a very substantial and profitable enterprise;

(2) ANZ was aware of what was required of it and had the capacity to fulfil its obligations;

(3) the effectiveness of the statutory scheme depends on lenders like ANZ taking their obligations seriously;

(4) the obligation to verify a consumer’s income is important in ensuring that lenders and consumers do not enter into contracts that may be unsuitable;

(5) the contraventions were repeated and occurred over a period of two years; and

(6) ANZ management did not ensure that relevant policies were complied with and, in the case of the contraventions involving MFI in particular, no action was taken despite management personnel having become aware of the issues affecting MFI.

On the other hand, by reason of the following matters, the contraventions are not the most egregious examples of contravening conduct:
(1) ANZ took some steps towards satisfying its statutory obligation but failed to take reasonable steps in that respect;

(2) ASIC does not allege that ANZ deliberately set out to breach its statutory obligations;

(3) the involvement of individuals with management responsibilities was limited; and

(4) loss or damage is not alleged.

Having regard to the above matters, I considered that each of the contraventions would appropriately be penalised by a figure towards or around the middle of the applicable range (about $850,000 per contravention, or $10.2 million in total), before the application of the “totality principle”, and before recognition of ANZ’s co-operation with ASIC throughout the investigation.

Having regard to the legal and factual overlap between the individual contraventions, and ANZ’s co-operation throughout the investigation, a further reduction in the order of 50 per cent was appropriate.”