Financial watchdog takes court action against Kiwibank for misleading home loan customers

Thursday, 9 December 2021

Kiwibank has apologised to customers and is paying compensation to them.

The Financial Markets Authority has started High Court civil proceedings against Kiwibank, claiming the bank misled around 35,000 home loan customers.

It claims Kiwibank made false and, or misleading representations to customers that they wouldn't be charged transaction fees on their accounts, if they had home loans with the bank.

“Kiwibank’s general terms and conditions provided that customers would not pay transaction fees on their accounts if those customers also had a home loan from Kiwibank,” the Financial Markets Authority Te Mana Tātai Hokohoko (FMA) said.

However, between September 2005 and the end of March 2020, about 35,000 of Kiwibank’s home loan customers did not have fee waivers applied to their accounts, and were overcharged a total of $1.17 million, the FMA said.

* Credit card repayment insurance warning: 200,000 people with 'poor value' cover

Financial Markets Authority chief executive Rob Everett and Reserve Bank governor Adrian Orr deliver the findings of their joint review into the conduct and culture of banks in New Zealand. First published in 2018.

* ASB begins $8.1 million in loan compensation payments to 73,000 borrowers

The action was taken under laws which only came into force in 2014, the FMA said, so its proceedings could only cover conduct from that year onwards, capturing some 19,000 of the total affected customers and overcharged fees totalling $576,809.

Kiwibank said it had discovered the issue in August 2019, and quickly fixed the problem.

“We’ve apologised to our customers for the error and fully refunded those fees and any interest they would have earned on that money,” the bank said.

“Kiwibank has acted proactively, openly, and transparently with the FMA on this matter. We are unable to comment any further now that it is before the courts.”

The FMA said the self-reporting by Kiwibank followed its decision to conduct a conduct and culture review of banks in June 2018.

“Banks were asked to provide details of any work under way to remediate any identified issues where bank conduct has resulted in detrimental outcomes for customers,” the FMA said.

In May this year, the bank began to compensate affected customers, the FMA said.

“The FMA has been advised that remediating customers is almost complete and will continue to request progress reports from Kiwibank,” the regulator said.

The FMA said it was seeking a declaration that Kiwibank contravened a fair dealing provision of the Financial Markets Conduct Act and an order that Kiwibank pay a pecuniary penalty to the Crown and costs.