New Zealand’s financial sector is now legally required to treat customers “fairly” under the Conduct of Financial Institutions regime. On paper, that sounds simple and unobjectionable. In practice, it raises difficult questions about how much discretion regulators should have over private businesses and how a vague standard like “fairness” should be enforced without distorting market choice.
Banks, insurers and credit unions have operated under this framework, which sits within the Financial Markets Conduct Act 2013 (as amended in 2022) and is enforced by the Financial Markets Authority. At its core is a broad obligation that financial institutions must treat consumers fairly.
Each institution must design, maintain, and publish a “fair conduct programme” that meets statutory minimum requirements. These include internal systems, controls, monitoring, and governance processes intended to demonstrate compliance. Failure to meet obligations can result in financial penalties.
On its surface, the objective appears straightforward: ensuring customers are treated appropriately. But the central challenge is that “fairness” is not a precise legal or economic concept. It is inherently subjective, leaving room for interpretation by regulators and institutions alike.
This creates real-world challenges for institutions trying to adjust to a fairness standard that isn’t clearly defined. At the same time, it also raises broader questions about where the line should be drawn between protecting consumers and risking excessive regulatory intervention.
In 2024, the government sought feedback on whether the legal minimum requirements for fair conduct programmes should be changed or removed altogether.
This came after concerns from industry that some of the fairness rules were either redundant, already covered by other regulations, or too rigid for the level of risk actually faced by consumers.
While industry participants generally supported the goal of fair treatment, they also highlighted the cost and complexity of meeting broad, principle-based obligations that overlap with existing financial regulation.
In response, the government opted to amend the minimum fairness requirements rather than scrap them entirely. In 2025, it put forward a draft amendment bill proposing changes to the legal requirements for fair conduct programmes.
Fairness becomes hard to define
This review of the law highlights how difficult it is to turn “fairness” into a clear legal standard. Fairness isn’t something that can be measured objectively — it’s inherently subjective and depends on perspective. What feels fair to one person may not feel fair to another.
Even so, financial institutions are now expected to demonstrate that the products and services they design align with the Financial Markets Authority’s evolving interpretation of fair treatment.
This means that even when consumers fully understand a product and willingly accept its risks, the fairness obligation may still lead institutions to question whether the product should be offered in the first place.
On the surface, putting consumer interests first may seem sensible. But in practice, it can also lead to unintended consequences.
Because the idea of fairness is so broad and open to interpretation, even if the Financial Markets Authority’s current approach seems reasonable, there’s no certainty future enforcement will stay the same.
Once Parliament embeds a flexible moral concept like this into law, it effectively passes a lot of interpretive power to whoever applies it next.
Fairness absolutely matters. But it arguably works better as a guiding principle for financial institutions and a shared expectation in the market, rather than a vague standard that can drift into regulatory paternalism.
There’s also a risk it shifts institutions away from simply providing products and services and toward monitoring or second-guessing consumer decisions.
A more direct approach may be to rely on existing laws like the Credit Contracts and Consumer Finance Act and the fair-dealing provisions in the Financial Markets Conduct Act.
The focus, then, would be on addressing clear misconduct, improving financial literacy, and stepping in where there is real, proven harm.