Court Ruling and Fine

Recently, the New Zealand High Court imposed a $2.47 million fine on TSB Bank after finding it guilty of unlawfully overcharging customers. Specifically, the bank was charged with illegally imposing over $3.6 million in late and credit-related fees. The breaches, which occurred from June 2015 to November 2021, impacted customers with TSB credit and loan accounts. Consequently, the Court described the bank’s actions as “reckless” and found that TSB failed to comply with the Credit Contracts and Consumer Finance Act (CCCF Act), particularly section 41, which prohibits unjustifiable credit charges and default fees.

Commerce Commission Investigation

Subsequently, the Commerce Commission, New Zealand’s competition and market regulator, pursued a civil suit against TSB Bank. During the investigation, it was uncovered that TSB’s fee structures were opaque and non-compliant with the CCCF Act. In particular, the Commission found that TSB charged fees beyond what was justified and failed to maintain transparency. As a result, the bank admitted to systemic failures that led to the overcharging of customers across 12 types of fees.

TSB’s Response and Remedial Actions

Following the investigation, TSB Bank ceased charging the problematic fees in November 2021. Moreover, the bank self-reported the issues to the Commerce Commission early in the subsequent year after conducting an internal audit. Consequently, TSB has made remedy settlements amounting to about $6 million to affected customers. Furthermore, the bank cooperated fully with the Commission’s investigation and has since implemented corrective measures.

Regulatory Concerns

Anne Callinan, Deputy Chair of the Commerce Commission, emphasized the seriousness of the breach due to the number of affected customers and the severity of the financial harm caused. In addition, she stressed that the rules around credit and default fees are well-established and that lenders must have proper processes to comply with the CCCF Act.

Judicial Observations

Justice Jagose, who presided over the case, noted that TSB’s fee arrangements were complex and lacked transparency. Thus, the bank set fees based on various commercial considerations rather than adhering to the statutory requirements. Furthermore, Justice Jagose criticized the bank for setting fees without adequate regard to the costs incurred or reasonable commercial standards.

Ongoing Compliance

In light of the ruling, the Court’s decision underscores the need for financial institutions to review and adjust their fee structures regularly. Consequently, the restrictions on fees aim to protect borrowers and ensure that customers can easily compare loan offers. As Callinan concluded, lenders must review their fees to ensure they are fair and transparent.