Charges involved misleading representations about services that the bank failed to deliver as agreed
The Auckland District Court has fined Kiwibank $1.5m after admitting to significant and long-running breaches of the Fair Trading Act, which resulted in over 35,000 customers being overcharged a total of $6.8m.
The court handed down the fine on November 26 following Kiwibank’s guilty plea to 21 criminal charges brought by the Commerce Commission.
The charges involved misleading representations to customers about services that Kiwibank failed to deliver as agreed. These failures were tied to longstanding flaws in the bank’s systems, some of which dated back to its inception in 2002.
In a statement, Commerce Commission deputy chair Anne Callinan described the breaches as serious and underscored the need for financial institutions to maintain effective compliance systems.
The breaches involved multiple issues, including the failure to apply agreed discounts and interest-free periods under package benefit agreements, improper calculations of loan repayments when customers requested changes, and neglecting to switch customers to principal and interest repayments at the end of interest-only periods. Additionally, Kiwibank did not provide agreed discounts on overdraft interest rates for home loan customers and charged incorrect fees to certain loan customers.
According to Callinan, these failures stemmed from errors in Kiwibank's electronic systems and inadequate quality assurance processes. The lack of thorough checks meant staff were not fully trained or equipped to implement required processes correctly, resulting in systemic non-compliance.
Kiwibank itself identified and reported the breaches to the commission and has since taken steps to remedy the situation. The bank has been contacting affected customers, issuing apologies, and providing refunds. To date, Kiwibank has allocated $9.2m for remediation efforts.
Callinan highlighted the importance of banks investing in robust compliance systems to protect consumers. She noted that consumers reasonably expect banks to avoid errors of this kind and emphasised the commission’s expectation that financial institutions prioritise their compliance obligations.
