Lawyer Demands Inquiry into MBIE Officials Over Banking Class Action

A prominent lawyer has called for a formal investigation into alleged “serious civil service process failures” by officials from the Ministry of Business, Innovation and Employment (MBIE) concerning a significant banking class action. Rachael Reed, KC, representing the plaintiffs, has expressed concerns regarding the portrayal of a risk assessment conducted by the Reserve Bank of New Zealand (RBNZ) that indicated a potential $12.9 billion risk to the banking system.

In a letter addressed to Public Service Commissioner Sir Brian Roche and Attorney-General Judith Collins, Reed highlighted issues surrounding the Credit Contracts and Consumer Finance Amendment (CCCFA) Bill, currently under review. The bill includes provisions that could allow a court to determine compensation for lenders rather than mandating the repayment of all interest and fees charged during breaches of disclosure between 2015 and 2019.

Reed criticized the RBNZ’s modelling, stating that it is not only based on unrealistic scenarios but also appears mathematically impossible. “The evidence demonstrates that MBIE officials have failed to provide such a foundation, instead relying on an incomplete and demonstrably flawed analysis,” she stated. Reed pointed out that both ANZ and ASB banks have publicly dismissed settlement offers of $300 million as excessive, raising questions about the validity of the $12.9 billion exposure figure.

Concerns Over Legislative Process

Reed expressed her bewilderment at the apparent acceptance of these figures by some members of the Parliament’s Finance and Expenditure Committee without thorough scrutiny. She called for an investigation to determine whether MBIE officials adhered to established standards of policy advice, consultation, and transparency. This inquiry would also assess the adequacy of the analysis that suggested a risk to New Zealand’s financial markets, justifying retrospective legislation that could impact tens of thousands of consumers.

In her correspondence, Reed emphasized the extraordinary nature of retrospective legislation, stating, “It should only be used where the foundation is transparently justified and unassailable.” She asserted that the depth of the alleged process failures could significantly affect democratic decision-making and the judicial rights of many New Zealanders.

MBIE’s Response

In response to Reed’s claims, Andrew Hume, General Manager of Commerce, Consumer and Business Policy at MBIE, defended the quality of the advice provided regarding the retrospective changes. Hume acknowledged that while MBIE was not actively considering retrospective amendments during public consultations in 2024, concerns about historical disclosure breaches raised by submitters warranted investigation.

“Our analysis is outlined in full in our Regulatory Impact Statement,” he stated. Hume noted that MBIE’s consultation was limited by commercial sensitivities and ongoing litigation. He clarified that final decisions regarding the bill were made by Ministers and Cabinet, and it is now currently under consideration by the Select Committee.

As the situation unfolds, the implications of this inquiry could have far-reaching consequences for both the banking sector and consumers in New Zealand. The outcome may also set precedents for how similar legislative matters are handled in the future, particularly regarding the balance between regulatory oversight and the protection of individual rights.