Banks and insurers have handed back $150 million to 1.5m people since 'conduct reviews' began in 2018
Thursday, 6 October 2022
Banks and insurers have handed back about $150 million to more than a 1.5m customers since regulators began to demand regular reports on their mistakes in 2018, the Financial Markets Authority Te Mana Tātai Hokohoko says.
The FMA and Reserve Bank Te Pūtea Matua launched a join Bank Conduct and Culture Review in 2018 asking banks to confess to the mistakes they had made, and were in the course of fixing.
It was New Zealand’s answer to the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which followed media reports of widespread unethical treatment of customers across the Tasman.
Banks initially confessed to “more than 50” major errors that affected 431,000 customers, with reparations paid, or owed, of around $23m.
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But instead of being a one-off, the bank conduct review led to ongoing reporting of errors to the regulators, and the scale of revealed errors in the sector ballooned.
Now, Clare Bolingford, the FMA’s director for banking and insurance, said: “The remediation work shows the extent of weaknesses in the systems and processes across banks and life insurers.”
She said in the banking sector alone, banks had confessed to 266 separate “issues” where 952,000 customers had been overcharged, or wronged, with banks having now paid $109m in compensation to them.
“We acknowledge the substantial work by banks and insurers to date to fix their customer issues, especially those firms tracing back further than they had to,” Bolingford said.
“It is likely there’s more self-reporting to come as firms continue these efforts. The more firms have looked, the more problems they’ve found.”
It was not just apologies and reparations the regulators had secured from banks.
The closer scrutiny of banks and insurers had led to a series of prosecutions. ANZ and Cigna admitted misleading customers, including charging some for insurance they could not realistically make claims on, and double-charging others.
Kiwibank is also facing court action with the FMA alleging it misled about 35,000 home loan customers, who were told they wouldn't be charged transaction fees on their accounts, if they had home loans with the bank.
ASB has had to repay about $8.9m to borrowers who it accidentally overcharged when they broke their fixed-term home loans between April 2005 and December 2016.
It has also had to make about $8.1m in compensation payments to about 73,000 borrowers who had home loans and personal loans with the bank between June 2015 and July 2019.
The success of the bank conduct review prompted the FMA and Reserve Bank to follow suit with a review of insurers in 2019.
Insurers had paid more than $43m in remediation for errors that resulted from “creaking systems and weak controls” to half-a-million customers in the four years since the regulators launched their crackdown on the sector, Bolingford said at the Financial Services Council conference for insurers and KiwiSavers in Auckland last month.
“In that time – almost four years – 225 such issues have been reported to us involving life insurers, many the result of creaking systems and weak controls,” she said.
“Nearly half-a-million customers have been impacted, and more than $43m paid in remediation. And that’s just for the one-third of issues whose impacts have been fully assessed.”
Some of those errors also involved banks, which have been major sellers of insurance, though banks have now largely sold their insurance companies.