Westpac will refund $7 million to 93,000 customers after reaching an agreement with the Financial Markets Authority and Commerce Commission.
This comes after Westpac did not correctly discount fees on a number of different banking packages and self-reported the issue to the FMA and Commerce Commission in December 2017.
The overall refund is made up in two parts. The bank will refund $1.28m to around 60,000 customers due to fee waivers being incorrectly applied to their tertiary or graduate banking accounts between 2007 and 2017.
In addition, the bank will issue refunds worth $5.7 million to around 30,000 customers, relating to incorrectly applied relationship rewards.
Westpac NZ acting general manager of consumer banking and wealth, Gina Dellabarca, said the issue was identified as part of a proactive review of products and services initiated by Westpac NZ.
"We apologise to all the customers affected, most of whom we have already refunded," Dellabarca said.
"In most instances, the individual amounts are small and are the result of errors in manual processes. We want to assure our customers that we have now changed our systems so that the issue does not occur again."
Anna Rawlings, Commerce Commission Chair, commended Westpac for taking steps to report and rectify the matter.
"The Commission also encourages the identification and self-reporting of conduct like this and appropriate remediation for affected customers," she said.
"We emphasise the importance of robust systems and sound monitoring practices to help avoid errors, and to quickly identify and fix them if they occur."
Westpac is currently in the process of contacting existing and former customers in regard to the refunds.