The Financial Markets Authority (FMA) has issued a warning to Kiwibank for overcharging its customers for more than 13 years.
According to the FMA, Kiwibank overcharged 8,663 customers a total of $912,053.79 between July 2011 and November 2024 by not applying fee waivers to certain joint account holders.
Since at least 2011, Kiwibank has been charging account fees on joint accounts where the secondary account holder met the age-based criteria, but the primary account holder did not.
From around March 2005 to November 2024, various editions of Kiwibank’s Fees and Limits brochures indicated that customers under the age of 18 or 19, or over 65, would not be charged transaction fees on certain accounts.
Kiwibank was initially made aware of the issue after a customer complaint in June 2023. Six months afterward, a staff member at Kiwibank recognised that the problem could be more widespread and not confined to just one customer.
The bank conducted an investigation and confirmed the issue before self-reporting it to the FMA in August 2024.
“We have taken steps to fully reimburse impacted customers and have strengthened our internal policies, systems and controls to prevent this from happening again,” Kiwibank said.
“We remain committed to fair and transparent banking practices and will continue to improve our processes to ensure we meet the expectations of our customers and regulators.”
The Financial Markets Authority’s executive director for response and enforcement, Louise Unger, stated that most of the overcharging—affecting 6,400 customers and totalling $747,000—occurred after the Financial Markets Conduct Act 2013 (FMC Act) came into effect.
“The responsibility is on financial service providers to clearly and accurately communicate their fees, as well as ensure that they charge fees in line with what they have promised,” Unger said.
“It is also important that financial service providers have appropriate policies, procedures and controls in place to identify and address any fee-related issues in a timely fashion.”
Unger explained that there were two primary root causes for the issue. The first was a lack of shared understanding within Kiwibank regarding whether and how the fee waiver should be applied to joint accounts.
The second was a system design limitation that allowed age-based fee waivers to be applied only according to the primary account holder’s age.
“We recognise Kiwibank’s cooperation and proactive effort to address the issue, including notifying the FMA and remediating impacted customers (including use-of-money interest). However, our view is that, in this instance, the issue could have been identified earlier with better product governance and internal controls.”