TSB fined $2.47 million for charging ‘unreasonable’ fees

TSB has been fined $2.47 million by the Commerce Commission after charging "unreasonable" fees to customers between 2015 and 2021. Photo / George Novak

TSB bank has been ordered to pay a $2.47 million penalty after it was found to have charged unreasonable credit and default fees.

The Commerce Commission took legal action against the bank after TSB self-reported breaches of the Credit Contracts and Consumer Finance Act (CCCFA).

The bank charged approximately $3.6m more than it should have across 12 “unreasonable” credit and default fees over six years between June 2015 and November 2021.

In two specific cases, TSB charged fees that it did not have a contractual right to charge.

Justice Pheroze Jagose considered “the bank’s long-term charging of unreasonable credit and default fees to be of high gravity” and said they “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”.

The bank has already made remediation payments of around $6m to 48,000 affected borrowers, both past and present.

TSB chief executive Kerry Boielle said the issue was identified and reported at the first opportunity following a comprehensive internal review conducted by its new management and board.

“We apologise to all customers who have been inconvenienced by this issue,” Boielle said.

Commerce Commission deputy chairwoman Anne Callinan said the number of customers affected, the level of harm from overpaid fees, and the duration of the breaches made it a serious concern.

She expected lenders like TSB to have proper processes in place to make sure they are following their obligations under the CCCFA.

“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,” Callinan said.

Previous breaches

TSB has been in hot water in recent times, with TSB ordered to pay $3.5m in civil penalties for breaching anti-money laundering laws back in 2021.

That claim was filed by the Reserve Bank to the High Court of Wellington after procedures, policies and controls for monitoring and managing compliance were not adequate or effective.

Then-Reserve Bank deputy governor Geoff Bascand said the penalties reflected TSB’s failure to comply with fundamental elements of the AML/CFT Act.

“While TSB has now embarked on a remediation programme, these proceedings were an escalated regulatory response by the Reserve Bank to ongoing non-compliance by TSB following a formal warning issued to TSB in 2016.”

Then-TSB chairman John Kelly said the breaches related to the bank’s risk assessment and compliance programme between 2013 and July 2019.

“The bank is committed to raising the bar in its compliance management and risk maturity and we are extremely pleased with the progress that has and continues to be made. There is still work to do, but stronger foundations are now in place, which will continue to be built on,” Kelly said.