Kiwibank facing criminal charges

The Commission has filed criminal charges against Kiwibank, alleging “systemic breaches of the Fair Trading Act” that have resulted in 36,000 customers being overcharged more than $7 million for fees. The overcharged amounts relate to fees and interest rates for home loans, credit cards and overdrafts.

The overcharging stemmed from “multiple errors in Kiwibank’s manual and electronic systems which resulted in Kiwibank misrepresenting what customers owed,” said Commission Deputy Chair Anne Callinan.

The systemic issues go back to 2002; however, the court action relates to overcharging from 2019 onwards, because FTA charges can only be brought within 3 years of the conduct being discovered.

“Lenders must have processes in place to ensure consumers are getting a fair deal and are charged what was advertised to them,” Callinan said.

“The Commission expects banks to make the necessary investment in the systems that support their compliance obligations so they get things right for consumers.”

Kiwibank reported the issues to the Commission and is contacting customers and refunding the amounts overcharged. 

Banking market study: lack of investment in systems

The Commission released its draft report into personal banking services in March 2024.

Amongst its preliminary findings of a lack of competition in the market, it was also “surprised by the limited investment by the major banks and Kiwibank in their core banking systems and the low prioritisation given to this.”

Limited investment in systems can lead to consumers paying more than they should. This recently happened in the general insurance market (house, contents, car and life insurance) where multi-policy discounts, inflation adjustments, and no claims bonuses weren’t calculated properly, resulting in customers being overcharged.

Low investment has also led to limited innovation in the banking sector. Banks have no impetus to improve services because of a lack of competition.

Consumer NZ agrees the lack of innovation is a direct result of the lack of competition in the sector.

We believe this is having destructive consequences when it comes to scams.

Our scam protections are lagging seriously behind those in overseas jurisdictions, such as the UK, and even the banks’ own parent companies in Australia.

This lack of investment has had a devastating impact on New Zealanders who have been scammed.

While the Ministry of Business, Innovation and Employment estimated the total loss to New Zealanders was around $200 million in 2023, we believe it is a lot higher.

Sign our petition calling on the government to step in and force banks, digital platforms, and telcos to do more to stamp out scams.

Kiwibank as a disruptor?

The Commission’s draft banking market study also suggested Kiwibank could, with more capital, become a disruptor in the market.

The Commission stated that “Kiwibank has the greatest potential to be a disruptive competitor in the short to medium term” but needed more access to capital and a strategic refocus, “which could involve significant systems development”.

We agree that it appears a lot of work would have to be done to ensure Kiwibank could act as a disruptor.

The Commission is currently considering submissions to its draft report and is due to release its final report in August 2024.