Kiwibank has been fined $1.5 million after it pleaded guilty to “systemic” and “long-running breaches” that led to 35,000 customers being overcharged a total of $6.8 million.
The bank was sentenced at the Auckland District Court yesterday after pleading guilty to 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”.
According to the Commerce Commission, which prosecuted the case, there were “significant failures” in which the bank did not provide services as agreed.
The issues were first identified by Kiwibank and reported to the Commerce Commission.
In a statement, the Commerce Commission said 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; and 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,” Commerce Commission deputy chair Anne Callinan said.
Kiwibank: Some credit products ‘failed to deliver promised benefits’
In a statement to 1News, a spokesperson for Kiwibank said the errors had occurred because some systems and processes related to credit products failed to deliver the promised benefits or pricing to certain customers.
Since reporting itself to the Commerce Commission, Kiwibank had been contacting customers to apologise and was in the process of refunding $9.2 million in mediation. The bank said these remediations would be completed by March 2025.
“Throughout this process, our focus has been on correcting issues for our customers as quickly as possible,” Kiwibank chief executive Steve Jurkovich said.
“We apologise for the errors and are committed to continuing to build an even stronger New Zealand bank to help make more Kiwis better off.”
Commerce Commission: ‘Some flaws dated back to the bank’s inception’
Callinan called the offending “serious” and said it was 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,” she said.
“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.”
