Systemic Breaches Of Consumer Law Lead To $1.5million Fine For Kiwibank

Kiwibank has been fined $1.5million after pleading guilty to systemic and long-running breaches of the Fair Trading Act that led to 35,000 customers being overcharged a total amount of $6.8 million.

Commerce Commission Deputy Chair Anne Callinan says the offending was serious and the result of a raft of failures in Kiwibank’s systems.

“There were long-standing flaws in Kiwibank’s systems and processes that led to these breaches, some of which likely date back to Kiwibank’s inception in 2002,” Ms Callinan says.

“Banks must have processes in place to ensure consumers are getting a fair deal and consumers would reasonably assume that banks wouldn’t make errors of this sort.”

“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 Commission prosecuted Kiwibank for 21 criminal charges under the Fair Trading Act for making misleading representations to its customers about its services, which Kiwibank did not provide on the stated and agreed terms.

There were significant failures in which Kiwibank did not provide the services as agreed, in relation to five issues, with their customers. Kiwibank failed to:

• provide agreed discounts and interest-free periods to customers who had entered into package benefit agreements
• properly calculate customers’ regular repayments when customers requested changes to their loan in particular circumstances
• ensure that customers were switched to repaying loan principal (as well as making interest payments) at the end of agreed interest-only periods
• provide agreed discounts on the overdraft interest rates payable by home loan customers
• charge the correct amounts of various fees to certain loan customers

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“These failures were caused by errors in Kiwibank’s electronic systems and a lack of quality assurance checks to make sure that staff knew how to carry out the processes required, and that these processes were being followed correctly,” Ms Callinan says.

The issues were first identified by Kiwibank and reported to the Commission. Kiwibank has been contacting and apologising to customers and is progressively refunding $9.2 million in remediation.

Kiwibank was sentenced in the Auckland District Court on 26 November.

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