TSB bank has been penalised $2.47 million after charging millions more than it should have through unreasonable credit and default fees.
The fine comes after the Commerce Commission took legal action against TSB for historic breaches of the Credit Contracts and Consumer Finance Act (CCCFA).
TSB self-reported the breaches to the Commission and has since made remediation payments of around $6 million to 48,000 affected borrowers.
The bank also fully co-operated with the investigation.
The bank charged around $3.6 million more than it lawfully should have through unreasonable credit and default fees.
When deciding the penalty, Justice Jagose considered the bank’s long-term charging of unreasonable credit and default fees “to be of high gravity”.
He said 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”.
TSB admitted to “system failures” that saw customers charged more than they should have across 12 credit and default fees between June 2015 and November 2021.
These failures breached the CCCFA’s credit and default fees provisions.
In two cases, the bank charged fees it had no contractual right to charge.
“In doing so it fell short of the care, diligence, and skill required of a responsible lender,” the Commerce Commission said.
Commerce Commission Deputy Chair Anne Callinan said the decision reminded CCCFA lenders that they “can’t charge fees that are more than the costs of the transaction”.
“These restrictions on fees are in place to protect borrowers and make sure Kiwi customers can easily compare loan offers – lenders need to regularly review their fees to ensure they are reasonable and not just set and forget them.”
She said TSB’s breaches were serious because of the large group of affected customers, the level of harm from overpaid fees, and the extensive duration of the breaches.
“The rules around credit and default fees are well established and we expect lenders like TSB to have proper processes in place to make sure they’re following their obligations under the CCCFA.”
‘We have completed a comprehensive remediation programme’
In a statement to 1News, TSB chief executive Kerry Boielle said the bank had admitted to the claims brought by the Commerce Commission.
“The historical fee issues occurred prior to the current management and Board and were found and self-reported by TSB to the Commerce Commission at the first opportunity, following a comprehensive internal review going back many years,” she said.
“We apologise to all customers who have been inconvenienced by this issue, and we have completed a comprehensive remediation programme, reimbursing all past and present customers we have been able to contact.”
TSB agreed to pay the $2.47 million civil pecuniary penalties as part of the settlement.