Kiwibank to be sentenced in October for duping some home loan customers over fees, overdrafts

Kiwibank incorrectly charged more than 36,000 customers.

Kiwibank will be sentenced in October for misleading some customers over home loan fees and overdrafts.

Court documents show in some new detail what the Commerce Commission accused Kiwibank of.

The Commerce Commission previously said multiple errors in Kiwibank’s manual and electronic systems led to more than 36,000 customers being incorrectly charged a total of about $7 million.

The bank faced 21 charges at Auckland District Court and has pleaded guilty.

“Kiwibank made representations in account statements rendered to certain home loan customers that those customers had been required to pay fees at certain amounts,” one charging document showed.

“In doing so, Kiwibank misrepresented the amounts it was entitled to charge those customers, in that the terms and conditions applicable to those loans provided either for lower fees, or no such fees.”

Several charges had that exact wording but another related to overdrafts.

The Commerce Commission said Kiwibank in some cases told customers they’d have to pay a standard overdraft interest rate.

“In doing so, Kiwibank misrepresented the correct legal position, under which it was to provide arranged overdrafts to those customers at the preferential interest rates notified on Kiwibank’s website.”

Another charge under the Fair Trading Act related to fees or interest for “member package” agreements.

“This misrepresented the effect of the affected customers’ rights under Kiwibank’s member package agreements, under which those customers had the right to have those fees discounted ... or to receive discounted rates.”

In another charge, the bank misrepresented the correct contractual position under loan agreements, as a result of miscalculating outstanding loan principals.

And in another charge, some Kiwibank customers agreed to an interest-only repayment period on their loans, but those periods did not end on the agreed date, due to errors in Kiwibank processes.

On the court documents, the earliest date for any of the offending was listed as May 31, 2019 and the most recent as May 30 this year.

Kiwibank boss ‘proud’ of his team

In a statement, Kiwibank said some systems and processes relating to credit products, such as home loans, credit cards and overdrafts, did not correctly deliver the promised benefits or pricing for some customers.

“We proactively identified the issues, reported them to the Commerce Commission and have fully co-operated with their investigation, while at the same time carrying out a remediation programme for all affected customers,” Kiwibank chief executive Steve Jurkovich said.

“While I’m disappointed with the mistakes we made in the past, I’m proud of the way our team has now come together to fix the problems and make things right for our customers.”

The bank said it had agreed with the Commerce Commission on a a summary of facts.

Kiwibank said it and the commission were “aligned in their views on the appropriate penalty”.

All the charges carried a maximum penalty of $600,000 for each charge.

On its website, Kiwibank referred to the “member package” in question.

“Some customers are eligible for a refund or payment for Kiwibank member package benefits they didn’t receive on a range of products including everyday accounts, term deposits, home loans, credit cards, overdrafts, personal loans and insurance. We’re making it right by making these payments plus interest.”

The bank said customers who recently received a letter or email from the bank about payment should complete a form on the Kiwibank website, and they’d be refunded within 10 business days.

Kiwibank previously said all remediations will be completed by the end of this year, if not complete already.

Banks behaving badly

Kiwibank is not the first bank to be penalised for misleading customers.

Westpac had to pay $5.1m over credit card fees back in 2006.

The Commerce Commission in 2012 began probing whether interest rate swaps were being misleadingly marketed.

And two years later it reached settlements with ANZ, ASB and Westpac over their behaviour in this area.

The four big banks have also landed in trouble for misleading customers at times in the past decade.

In 2015, a High Court judge declared that ANZ breached the Fair Trading Act for misleadingly representing interest rate swaps to some customers.

Westpac admitted credit card disclosure breaches and agreed to pay customers $3.7m in 2020.

The same year, ANZ admitted a breach of its responsible lending obligations, and agreed to pay customers $29.4m.

In December 2020, the Commerce Commission warned BNZ over likely responsible lending breaches and failure to provide timely, accurate information to borrowers.

BNZ had refunded $3.8m in interest and fees to borrowers affected by those issues in late 2018.