Kiwibank has become the fifth major bank to plead guilty to failing to properly disclose currency conversion fees paid by its MasterCard cardholders, the Commerce Commission says.
State-owned Kiwibank had pleaded guilty to five charges of breaching the Fair Trading Act, and was today fined a total of
$134,000 in Auckland District Court.
Kiwibank would also pay $172,051 in compensation to customers, and $10,000 to the commission in costs.
Consumers would be contacted by Kiwibank if they were affected and most should receive their compensation by August.
The commission said it began investigating Kiwibank after it introduced a MasterCard in 2003, and failed to disclose the charges on bank statements.
Kiwibank admitted that foreign currency exchange fees were charged but not adequately disclosed during the period from May 2003 to May 2005.
The "exchange rate" used to convert foreign currency transactions into New Zealand dollars included a fee payable to Kiwibank of 1.5 per cent and a fee payable to MasterCard of 1.1 per cent, the commission said.
Kiwibank acting chief executive Paul Brock said the bank recognised that the disclosure of fees and charges on foreign currency transactions had not been acceptable, despite being the industry standard at the time.
"We regret that our disclosure did not meet the standards of the Fair Trading Act, and unreservedly apologise for any inconvenience caused to customers."
Kiwibank had carefully reviewed its disclosure of fees and charges, and had been fully compliant with New Zealand standards since September 2005.
The commission has prosecuted eight banks and two credit card companies for inadequate disclosure of currency conversion fees.
As a result of prosecutions of ANZ, National Bank, BNZ, Westpac and Kiwibank, about $19.4 million in compensation had been paid to consumers, about $2.6 million paid in fines, and $330,000 paid to the commission in costs.
Prosecutions of ASB, TSB, American Express, Diners Club and The Warehouse Financial Services continued.
Commission chairwoman Paula Rebstock said banks knew fee levels were important to customers, and in other areas advertised low or no fee options to try to attract business.
"But as long as these foreign exchange fees remained hidden there was no incentive for banks to lower them."
- NZPA
