In a recent development highlighted by the Financial Markets Authority (FMA), Kiwibank has been mandated to pay a civil penalty amounting to $812.5m.
This penalty comes in light of the bank’s misleading representations to several customers and violating the Fair Dealing provisions of the Financial Markets Conduct Act 2013. The court took note of the bank’s substantial contraventions over a lengthy time span, affecting a significant number and proportion of customers.
Justice Francis Cooke highlighted the criticality of banking institutions maintaining accurate and dependable systems to safeguard financial entitlements of customers. He underscored, “Such failures potentially have important market consequences…They cannot be expected to cross-check every item on their bank statements, and there would be adverse market implications if any such expectation existed.”
Between 1 September 2005 and 31 March 2020, approximately 35,000 of Kiwibank’s home loan customers were overcharged by a total of $1,172,639.94 due to neglected fee waivers. With the FMC Act enforcing regulations from 1 April 2014 onwards, the FMA’s legal proceedings encompass conduct from this date, thereby focusing on 19,000 customers and overcharged fees summing up to $576,809.66.
Despite Kiwibank’s remediation efforts and self-reporting the issue, FMA Head of Enforcement Margot Gatland conveyed a clear message. She remarked, “Protecting customers from consumer harm is a priority for the FMA and the judgment recognises the significant impact of Kiwibank’s conduct. While Kiwibank embarked on its own remediation programme, and ultimately self-reported the issue, the failure of its internal systems and controls resulted in considerable customer harm over a prolonged period.”
In May 2021, Kiwibank began to rectify all affected customers by reimbursing the overcharged amounts, plus interest.
Justice Cooke said that: “Such failures potentially have important market consequences. This is particularly so when the financial impact for each individual customer is low, but where the financial benefit for the institution is higher because of the number of affected customers.”
FMA Head of Enforcement Margot Gatland said: “Protecting customers from consumer harm is a priority for the FMA and the judgment recognises the significant impact of Kiwibank’s conduct. While Kiwibank embarked on its own remediation programme, and ultimately self-reported the issue, the failure of its internal systems and controls resulted in considerable customer harm over a prolonged period.”
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