Kiwibank faces a $1.5m fine for systemic Fair Trading Act breaches
Kiwibank has been fined $1.5 million after pleading guilty to 21 breaches of the Fair Trading Act, resulting in overcharges to 35,000 customers totaling $6.8 million.
The breaches, stemming from systemic failures in Kiwibank’s processes, date back as far as the bank’s inception in 2002.
Commerce Commission Deputy Chair Anne Callinan (pictured above) described the case as serious.
“There were long-standing flaws in Kiwibank’s systems and processes that led to these breaches,” Callinan said. “Banks must have processes in place to ensure consumers are getting a fair deal.”
Kiwibank: Failures in systems and processes
The breaches revolved around misleading representations and failure to deliver services as agreed. Key issues included:
- Not providing promised discounts and interest-free periods to customers with package benefit agreements
- Miscalculating repayment amounts when loans were modified
- Failing to transition customers to principal-and-interest repayments after agreed interest-only periods
- Incorrectly charging overdraft interest rates
- Overcharging various fees on certain loans
“These failures were caused by errors in Kiwibank’s electronic systems and inadequate quality assurance,” Callinan said.
Kiwibank’s response and remediation
Kiwibank identified the issues and reported them to the Commerce Commission, initiating a refund process for affected customers. The bank is returning $9.2m, including the $6.8m in overcharges and additional compensation.
Kiwibank has been contacting customers to apologise and issued a public commitment to improving its systems.
Commerce Commission’s warning to banks
The Commerce Commission stressed the importance of robust compliance systems.
“The commission expects banks to make the necessary investment … so they get things right for consumers,” Callinan said.
Kiwibank’s sentencing, held in the Auckland District Court on Nov. 26, underscores the need for financial institutions to prioritise consumer protection.
Read the ComCom media release here.
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