Kiwibank has been ordered to pay a large sum after making "false and/or misleading representations to some customers", according to the Financial Market Authority (FMA).
The bank was given a $812,500 civil penalty at the High Court in Wellington after proceedings brought about by the FMA.
According to a statement released by the FMA this afternoon, the case brought against Kiwibank was over general terms and conditions that stated customers would not pay transaction fees on their accounts if they also had a home loan from Kiwibank.
"However, between September 1, 2005 and March 31, 2020, some 35,000 of Kiwibank's home loan customers did not have fee waivers applied to their accounts and were overcharged a total of $1,172,639.94," the FMA said.
"As the FMC Act came into force from 1 April 2014, the FMA's proceedings can only cover conduct from that date onwards, capturing some 19,000 of the total affected customers and overcharged fees totalling $576,809.66."
The FMA added that Kiwibank admitted breaching the Fair Dealing provisions of the Financial Markets Conduct Act 2013 (FMC Act) earlier this year and the FMA and Kiwibank, "agreed the penalty reflected the seriousness of the breaches".
Justice Francis Cooke delivered the verdict at Wellington's High Court.
"Such failures potentially have important market consequences. Banking customers can rightly assume that their bank has good systems and has accurately calculated and applied financial entitlements," she said.
"They cannot be expected to cross-check every item on their bank statements, and there would be adverse market implications if any such expectation existed. This is particularly so when the financial impact for each individual customer is low, but where the financial benefit for the institution is higher because of the number of affected customers.
"The relevant conduct here involved negligence, and no intention to deprive customers of their entitlements. Once identified Kiwibank also brought the contraventions to the FMA’s attention, and embarked upon a process of remedying their error, and addressing its systemic failures."
In May 2021, the FMA said Kiwibank commenced efforts to remediate all affected customers. The remediation included the amounts overcharged, plus use-of-money interest.
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