BNZ warned for 'likely' loan law breaches involving 11,956 borrowers

Wednesday, 2 December 2020

BNZ self-reported possible breaches of responsible lending and disclosure laws over more than 11,000 loans in 2015, 2016, and 2017.

Bank of New Zealand has been warned by the Commerce Commission over “likely” responsible lending breaches involving nearly 12,000 borrowers.

The commission investigated after BNZ approached it in 2018 to self-report 15 potential breaches of the CCCF Act to the commission.

The potential breaches related to certain home loans, personal loans, credit cards and overdrafts given to customers between June 6, 2015 and February 24, 2017.

But the commission said BNZ likely breached responsible lending and disclosure obligations in thousands of instances.

Bank profits have fallen as a result of provisioning for bad loans as the economy took a hit from the Covid-19 pandemic.

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There were 11,956 affected customers, the commission said.

“In the Commission’s view, BNZ failed to meet the requirements of the Credit Contracts and Consumer Finance Act 2003 (CCCF Act) including by making errors when delivering information required by the Act,” it said.

In some cases BNZ provided incomplete or inaccurate disclosure, and in other cases disclosure was provided a day, a few days, or as many as seven months after the information should have been provided to borrowers.

BNZ’s Dan Huggins, executive for customer, products and services, said the bank had decided to make goodwill payments of $350 to every customer affected.

He said: “We sincerely apologise to every customer affected by this, and we deeply regret the errors. We hold ourselves to a high standard and in this case, we missed the mark.

“While no customer was out-of-pocket or raised any concerns with us, it’s possible people may have been confused by the errors in their documents, so we’re putting it right.

He said customers did not need to do anything.

“The vast majority of customers affected by these errors will have already received a letter confirming this and their payment,” Huggins said.

Commission Chair Anna Rawlings said: “We expect lenders to regularly audit their systems to make sure that they can comply with consumer credit law, or quickly identify problems if they arise, fix them and provide appropriate remediation to borrowers.”

In late 2018 BNZ refunded approximately $3.8 million in interest and fees to borrowers affected by these issues, she said.

BNZ had co-operated with the commission throughout the investigation, and in September 2020 it refunded $350 to each borrower affected by its likely failure to meet responsible lending obligations, the commission said, adding up to a total refund of more than $1m to more than 2300 affected borrowers.

“BNZ has identified these matters itself and reported them to the commission, made remediation payments to its customers and made system changes to reduce the risk of issues like this arising in the future,” said Rawlings.

Because of these actions by BNZ, the commission decided a warning was the appropriate response, said Rawlings.

While the commission believed the bank had likely breached the law, it said only the courts could decide whether a breach of the law had in fact occurred.

It said the purpose of a warning letter was to inform the recipient of the commission’s view, to suggest a change in the recipient’s behaviour, and to encourage future compliance with the law.