Kiwibank has been formally warned by the Financial Markets Authority (FMA) for failing to correctly apply aged-based fee waivers to thousands of joint account holders over a 13-year period, resulting in more than $900,000 in overcharges.
Between July 2011 and November 2024, Kiwibank incorrectly charged transaction fees to 8,663 joint account customers, despite promotional materials stating that customers under 18 or 19 years old, or over 65, would be exempt.
It affected joint accounts where the secondary account holder met the age-based criteria but the primary holder did not.
Kiwibank was first alerted to the issued by a customer complaint in June 2023, with a staff member identifying the potential for the issue to be more widespread in December 2023.
The morning’s headlines in 90 seconds, new report into submersible implosion, body found in Auckland park, and mixed injury news for the Warriors. (Source: 1News)
The issue was subsequently investigated and validated, leading to Kiwibank reporting itself to the FMA in August last year.
The FMA found that 6,400 customers were affected after the Financial Markets Conduct Act 2013 (FMC Act) came into force in April 2014, with overcharges totalling $747,000.
Under the FMC Act, financial service providers must not make false or misleading representations. The FMA said Kiwibank’s account statements had misrepresented its right to charge fees and was a likely breach of the Act’s fair dealing provisions.
FMA executive director for response and enforcement Louise Unger said financial service providers had a responsibility to clearly and accurately communicate fees and ensure they charged what was promised.
“It is also important that financial service providers have appropriate policies, procedures and controls in place to identify and address any fee-related issues in a timely fashion.”
Two root causes of the issue were identified, Unger said.
“First, a lack of common understanding across Kiwibank about whether, and how, the fee waiver should apply to joint accounts. Second, a system design limitation where the age-based fee waivers could only be applied based on the primary account holder’s age.
“We recognise Kiwibank’s cooperation and proactive effort to address the issue, including notifying the FMA and remediating impacted customers (including use-of-money interest). However, our view is that, in this instance, the issue could have been identified earlier with better product governance and internal controls.”
In a statement to 1News, Kiwibank acknowledged the warning, saying it took the matter seriously and regretted the error.
“We have taken steps to fully reimburse impacted customers and have strengthened our internal policies, systems and controls to prevent this from happening again,” a spokesperson said.
“We acknowledge the FMA’s findings and appreciate their recognition of our cooperation and proactive efforts to address this issue, including self-reporting it to the FMA and remediating impacted customers.
“We remain committed to fair and transparent banking practices and will continue to improve our processes to ensure we meet the expectations of our customers and regulators.”