Financial services are no longer the main target of class actions

0

For the first time in more than a decade, the banking and financial services industry has not seen the most class action lawsuits of any industry.

A new report on Australian class actions over the past year from law firm Allens has compared the number of lawsuits filed sector by sector.

As Allens noted, the banking and financial services sector has long been the top target for class action lawsuits, but last year the government and healthcare sectors overtook it.

In 2021, 17 class actions were filed against the financial services sector, compared to 32 the previous year and 25 during the period 2017-2019.

The industry accounted for 17% of all class actions in Australia, up from 32% in 2020.

These included a class action lawsuit against ANZ over its interest-free credit card contracts, alleging it wrongfully charged interest. The New Zealand units of ANZ and CBA had also filed documents relating to wrongfully charged loan fees.

By comparison, the public sector saw 21 lawsuits in 2021 (21% of all filings, down from 13% in 2020) and healthcare saw 19.

Other industries fell behind banking and financial services, such as technology, media and telecommunications, with its 11 lawsuits.

Allens’ partner Jenny Campbell called it an “interesting change”.

“This may be an indication that class action lawsuits stemming from issues laid out in the royal commission are beginning to wane,” the Allens report said.

“However, even if this is the case, we believe it is too early to make any predictions about a material decline in class action risk for this sector.”

However, the law firm has anticipated that there will be activity related to ASIC’s recent focus on consumer risk, such as poor product design and governance, mis-selling and failure to comply with conflict of interest requirements and disclosure obligations, and cyber-scams.

“ASIC’s stated enforcement priorities for 2021-2022 include responding to elevated consumer risks…with a focus on regulated sectors including financial advisers, investment managers, pension retirement and insurance,” the report said.

“With collective action already underway in many of these areas, we expect this to continue in the near term.”

Overall, class action lawsuits were down 13% during the year, but still above the level of filings five years earlier.

Consumer complaints remained the most common complaint type during the year (accounting for 23% of complaints), including lawsuits over pension contributions, insurance policies and other issues such as medical devices, electricity prices and transportation services.

Employment-related class actions accounted for 19% of class actions, while shareholders accounted for 15%, their lowest levels in more than a decade.

Consumer complaints are expected to continue to dominate, alongside an increase in lawsuits related to climate change and privacy and data breaches.

The report also notes growing uncertainty for litigation funding, amid recent regulatory reforms.

[Related: ASIC ramped up lawsuits in FY21]

Financial services are no longer the main target of class actions

mortgage

Last update: April 04, 2022

Posted: March 22, 2022

Sarah Simkins

Sarah Simkins

Sarah Simpkins is the managing editor of Mortgage Business and The Adviser.

Previously, she reported on banking, financial services and wealth management for InvestorDaily and ifa.

You can contact her on This email address is protected from spam. You need JavaScript enabled to view it..

Share.

About Author

Comments are closed.