The Financial Markets Authority (FMA) is taking Kiwibank to court further to it allegedly overcharging 35,000 customers over a period of 15 years.
The FMA filed civil proceedings in the High Court against the bank for making false and/or misleading representations under the fair dealing provisions of the Financial Markets Conduct (FMC) Act.
The regulator alleges that between September 2005 and March 2020, Kiwibank didn’t waive fees applied to its home loan customers’ accounts, even though it said it would.
Around 35,000 customers were overcharged a total of $1.17 million.
But because the FMC Act came into force in April 2014, the FMA’s proceedings can only cover conduct from that date forward, capturing around 19,000 customers and $576,810 in fees.
Kiwibank said manual processes led to the errors.
It started refunding customers fees and interest they would’ve earned in May 2021.
The problem came to light in August 2019, well into the conduct and culture review into New Zealand banks undertaken by the FMA and Reserve Bank.
The FMA said, “In June 2018 the FMA and the Reserve Bank of New Zealand commenced their joint conduct and culture review of NZ registered banks. Banks were asked to provide details of any work underway to remediate any identified issues where bank conduct has resulted in detrimental outcomes for customers.
“Following publication of the findings from the joint review, the FMA continued to ask banks to inspect their systems for issues. Kiwibank first identified the affected customers in or around August 2019, advised its board of the issue in October 2019 and reported the issue to the FMA shortly after.
“The steps taken by Kiwibank after it discovered this problem were relevant to the FMA’s enforcement response. However, the nature of the underlying conduct will always be the driving factor in assessing the appropriate response, and the FMA considered the alleged conduct in this case warranted civil proceedings…
“The FMA is seeking a declaration that Kiwibank contravened a fair dealing provision of the FMC Act and an order that Kiwibank pay a pecuniary penalty to the Crown and costs.”
Kiwibank said, “We are sorry for the impact this issue has had on our customers. We remain committed to finding any such issues and making them right… Kiwibank has acted proactively, openly, and transparently with the FMA on this matter.”