BNZ to cough up $5.5m for lack of disclosure

Bank of New Zealand, owned by National Australia Bank, has pleaded guilty in the Auckland District Court to failing to properly disclose fees on foreign currency transactions on credit and debit cards.

The Commerce Commission, which took the case against BNZ and other major banks and credit card issuers, said today BNZ had been fined $550,000 and would pay $5 million in compensation plus $80,000 in costs.

BNZ is the third major bank to plead guilty to breaching the Fair Trading Act after ANZ and National banks. ANZ and National have merged since the commission began its investigation and the group had to pay over $11m in fines and compensation.

The court found foreign currency exchange fees were charged but inadequately disclosed between February 2002 and May 2004. Affected BNZ customers should receive their compensation by November.

The commission investigated following complaints that fees were being charged on top of the exchange rate and had not been adequately disclosed. The fees were not shown on bank statements, and were not adequately disclosed in BNZ's terms and conditions.

Customers paid fees of more than 2 per cent of the total transaction.

Commission chair Paula Rebstock said the result was a victory for consumers, many of whom would had unknowingly paid the charges.

"While fees like these remain hidden, banks have no incentive to offer lower fees.

"The commission considers that disclosing the fees properly will ultimately result in more competition and lower fees for customers," she said.

Ms Rebstock said that since the commission investigated the issue, banks had begun showing such fees.

The commission is still pursuing cases against Westpac, ASB, TSB, American Express, Diners Club and The Warehouse Financial Services.

When ANZ was sentenced, Judge Graham Hubble said financial organisations had an obligation to ensure openness and frank disclosure, particularly in relation to fees.

The offences were "the very offending the Act tries to prohibit to ensure consumer protection", he said.

BNZ said in a statement today it had settled with the commission. It said it was concerned its practices at the time did not give customers sufficient information.

"Our disclosure on fees and charges was industry standard at the time, but we now accept that the level of disclosure was inadequate," Blair Vernon, Bank of New Zealand general manager of personal service, said.

"We are sorry that our disclosure didn't reach acceptable standards, and for any inconvenience to customers. We will be contacting existing and previous customers to provide compensation as swiftly as possible."

BNZ was unable to say how many of its customers were likely to receive compensation.

- NZPA