Bank fined for flouting FTA
Kiwibank has been fined $1.5 million after pleading guilty to systemic and long-running breaches of the Fair Trading Act (FTA) that led to 35,000 customers being overcharged a total amount of $6.8m.
Anne Callinan, the Commerce Commission’s deputy chair, says: “There were flaws in its systems and processes that led to these breaches, some of which likely date back to Kiwibank’s inception in 2002.
“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 systems that support their compliance obligations so they get things right.”
The regulator prosecuted Kiwibank for 21 criminal charges under the FTA for making misleading representations about its services, which it didn’t provide on the stated and agreed terms.
There were significant failures in which it did not provide the services as agreed, in relation to five issues, with its customers. The bank failed to:
• Provide agreed discounts and interest-free periods to customers who had entered into package benefit agreements.
• Properly calculate customers’ regular repayments when they requested changes to their loans in particular circumstances.
• Ensure 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 overdraft interest rates payable by home-loan customers.
• Charge the correct amounts of various fees to certain loan customers
“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,” says Callinan.
The problems were first identified by the bank and reported to the regulator. Kiwibank, which was sentenced in Auckland District Court on November 26, has been contacting and apologising to clients, and is refunding $9.2m in remediation.
