BNZ, one of New Zealand’s biggest banks, has been forced to pay $2.6 million after misleading customers for almost 10 years over interest calculations on some non-profit accounts.
The failure left more than 20,000 customers out of pocket, denying them over $5 million in interest they should have received.
The Financial Markets Authority said the bank accepted accountability for breaching fair dealing rules, agreeing to pay $2.6 million to the Crown through an enforceable undertaking.
According to the FMA, the bank told customers in 2014 that interest would be calculated daily but failed to consistently deliver on that commitment.
BNZ used a lowest-monthly-balance method to calculate interest on non-profit accounts.
The FMA said the practice left customers receiving less interest than they were entitled to.
The bank only became aware of the issue in September 2023 after a customer raised concerns.
According to an FMA spokesperson, “BNZ admitted that it made misleading representations in its terms and conditions and customer statements about how interest would be calculated, breaching sections of the Financial Markets Conduct Act relating to false or misleading conduct.”
Alongside the $2.6 million settlement, the bank agreed to improve its policies, processes, and oversight mechanisms to prevent similar failures from occurring again.
“This reflects the broader expectations now applying under the Conduct of Financial Institutions (CoFI) regime, which requires financial institutions to have effective fair conduct programmes and to treat consumers fairly,” the FMA said.
FMA Head of Enforcement Margot Gatland said financial institutions have a responsibility to ensure their terms and customer communications accurately reflect how their products operate in practice.
BNZ CEO Dan Huggins acknowledged the FMA’s findings and apologised to customers impacted by the issue.
“Once we became aware of the issue, we commenced a review, self-reported to the FMA, and took the product off sale. We have been working constructively with the FMA throughout its investigation.”
“All impacted customers have been remediated, including use of money interest,” Huggins said.