KB Kookmin Bank to refund $11 million to Kiwi borrowers in settlement with Commerce Commission

KB Kookmin Bank is one of South Korea's largest by assets and one of the country's "big four" banks. Photo / Getty Images

Major South Korean bank KB Kookmin Bank will refund $11 million to borrowers in New Zealand after a Commerce Commission investigation found it had breached its obligations under the Credit Contracts and Consumer Finance Act (CCCFA).

In a settlement with Commerce Commission, following an investigation by the watchdog, Kookmin Bank admitted to failing to ensure that it provided compliant initial disclosure about its home and personal loans between 2015 and 2021 across nearly 500 contracts.

The South Korean-registered bank operating in New Zealand signed court-enforceable undertakings committing to the payment of compensation of $11,029,020.46 to affected borrowers.

Commerce Commission chairman Dr John Small said this created a risk of consumer harm, with many borrowers potentially making uninformed borrowing decisions or not understanding their hardship, cancellation and dispute resolution rights under the contract.

“These obligations are in place to ensure that borrowers can make informed decisions before entering contracts, reducing the risk for financial harm,” Small said.

Under the CCCFA, lenders have obligations to provide key information (disclosure) to borrowers before they enter a loan.

These include interest rates and fees, cancellation rights and what the borrower can do in the event of financial hardship.

Kookmin Bank is one of South Korea’s “big four” banks and had 500.34 trillion won (NZ$625.8 billion) in assets in the fiscal year of 2022, according to Statista.

The Commission began investigating Kookmin Bank in November 2021 after identifying that the standard disclosure documents on its website were missing key information required by the CCCFA.

Kookmin Bank will be contacting affected borrowers as part of the settlement and enforceable undertakings.

“Banks are a key source of borrowing for consumers, with typically large sums of money involved, so it’s vital they abide by the law and are resourced to meet all of their compliance obligations,” Small said.

Kookmin Bank has a branch in Auckland at Lumley Tower.