Kiwibank faces criminal charges filed by ComCom

Tuesday, 11 June 2024

The Commerce Commission has filed criminal charges against Kiwibank Limited alleging systemic breaches of the Fair Trading Act.

Kiwibank overcharged over 36,000 customers more than $7 million for fees and interest rates in relation to home loans, credit cards and overdrafts, over a period of several years, the commission said.

Kiwibank issued a statement acknowledging the charges, and said it was “disappointed” to have let customers down.

Commission deputy chairperson Anne Callinan said: “These are serious charges, stemming from multiple errors in Kiwibank’s manual and electronic systems which resulted in Kiwibank misrepresenting what customers owed.”

The errors included electronic systems wrongly calculating the interest owed by customers, the commission said.

But there were instances of borrowers making repayments on terms they did not intend to.

“Examples of this include a customer’s interest-only repayments not being updated to principal and interest at the end of the agreed interest-only period,” the commission said.

In addition, some people agreed to Kiwibank services in part due to being offered promotional discounts, but those discounts were not applied as advertised.

“In the commission’s view these are long-standing, systemic breaches of the Fair Trading Act some of which date back to Kiwibank’s inception in 2002,” Callinan said.

“Lenders must have processes in place to ensure consumers are getting a fair deal and are charged what was advertised to them,” she said.

“The commission expects banks to make the necessary investment in the systems that support their compliance obligations so they get things right for consumers.”

The issues were first identified by Kiwibank and reported to the commission, she said.

Kiwibank had been contacting customers and was progressively refunding them the money they had been overcharged, she said.

The commission’s charges related specifically to overcharging from 2019 onwards.

In a statement, Kiwibank said it reported breaches to the commission as a result of the work it had undertaken to ”proactively seek out, investigate, and resolve issues where errors have been made“.

“Kiwibank has fully co-operated with the Commerce Commission’s investigation and carried out a remediation programme for affected customers,” it said.

“All remediations will be completed by the end of this year, if not complete already.

At June 30 last year, Kiwibank had set aside $8m to refund customers, its June 2023 disclosure statement said.

It’s not the first time Kiwibank has been in trouble with the commission. In 2020, Kiwibank entered into a settlement agreement with the commission after reporting that it failed to have in place robust home loan variation disclosure policies, procedures and systems.

Kiwibank admitted that it had failed to act with the care, diligence and skill of a responsible lender and agreed to make remediation payments to over 48,000 borrowers, totalling $5.2m.

Kiwibank is not the first bank to be in trouble with the commission:

ANZ

2006, ANZ National Bank was fined after a commission investigation into failures to properly disclose credit card foreign currency transaction fees. In 2010 the bank settled a Fair Trading Act investigation by the commission into investment funds that lost investors large portions of their capital.

2014, ANZ settled a case with the commission over the marketing of interest rate swaps to farmers.

2020, ANZ settled an investigation by the commission admitting it broke responsible lending obligations.

2021, ANZ was fined at the High Court in Auckland for misleading credit card customers over insurance, a case taken by the Financial Markets Authority.

Westpac

2020, Westpac settled a commission investigation, admitting it breached the Credit Contracts and Consumer Finance Act.

2019, Westpac had “enforceable undertakings” imposed by the commission after the regulator said the bank misrepresented account packages aimed at school leavers.

BNZ

2000, BNZ gave the commission ‘undertakings” over making misleading credit card claims.

2006, the bank was fined breached for not adequately disclosing foreign exchange transaction fees, after an investigation by the commission.

2020, BNZ was warned by the commission over likely responsible lending breaches and failures to provide timely and accurate information to borrowers.

ASB

2014, ASB bank reached a settlement with the commission over the marketing of interest rate swaps to farmers.

2021, the bank agreed a settlement with the commission after admitting it failed to act as a responsible lender by failing to ensure its systems and processes were sufficient to ensure that the required variation disclosure was given to more than 73,000 home and personal loan customers who made certain changes to their loans.