TSB fined for CCCFA breaches
The Commerce Commission has secured a $2.47 million penalty from TSB Bank Ltd for historical breaches of the Credit Contracts and Consumer Finance Act (CCCFA).
The bank charged about $3.6m more than it lawfully should have through unreasonable credit and default fees.
Anne Callinan, the commission’s deputy chair, says the court’s decision is a reminder to lenders they can’t charge fees that are more than the transaction’s costs.
“These restrictions are in place to protect borrowers and make sure Kiwi customers can easily compare loan offers,” she says. “Lenders need to regularly review their fees to ensure they are reasonable, and not just set and forget them.”
In deciding the penalty, his Honour Justice Jagose considered the bank’s “long-term charging of unreasonable credit and default fees to be of high gravity”.
The judge added that TSB’s breaches “strike directly at the act’s objective of establishing efficient, fair and transparent credit, and default fees under consumer credit contracts between creditors and responsible lenders”.
The bank admitted to system failures that saw customers charged more than they should have been across 12 credit and default fees between June 2015 to November 2021. These failures breached CCCFA provisions.
In two cases, it charged fees that it didn’t have a contractual right to charge and, in doing so it fell, short of the care, diligence and skill required of a responsible lender.
TSB self-reported the issues to the commission and has made remediation payments of around $6m to 48,000 affected borrowers. It fully co-operated with the regulator’s investigation.
Callinan says, in the commission’s view, the TSB’s breaches were serious given the large number of customers affected, the level of harm from overpaid fees and extensive duration of the breaches.
“The rules around credit and default fees are well-established. We expect lenders like TSB to have proper processes in place to ensure they’re following their obligations under the CCCFA.”
