Westpac New Zealand has admitted to $6.35 million in overcharges. Photo / NZME
Westpac New Zealand has admitted to “misleading representations” that resulted in $6.35 million in overcharges, the Financial Markets Authority said.
The FMA said Westpac made the admissions in civil proceedings brought by the authority at the High Court in Auckland.
Westpac’s breaches of the fair dealing provisions under the Financial Markets Conduct Act 2013 affected a total of 24,621 customers.
The FMA said Westpac’s issues stemmed from deficiencies in its systems that meant the bank had failed to deliver to them contractually agreed discounts.
The FMA and Westpac have agreed to resolve the proceedings on terms acceptable to all parties.
Westpac admitted having made misrepresentations in respect of:
The FMA said each of the packages offered a range of discounts and preferential rates across Westpac’s banking services.
When a customer entered into a package agreement, Westpac staff had to manually record a note in the customer’s file to confirm their eligibility for the package benefits.
When eligible customers subsequently acquired other products or services from the bank, Westpac had no process for staff to check whether the customer was eligible for package benefits on the subsequent products and services.
There was no guidance for employees, the FMA said.
In the event, Westpac frequently overlooked the point; in turn up to 31% of eligible customers were overcharged.
The overcharges were recorded in customers’ account statements (for account and card benefits) and/or their policy schedules and annual renewal letters (for insurance benefits).
In each case misleading pricing information was displayed to customers, implying that the benefits had been applied in circumstances that they had not.
This concerned packages Westpac offered to its personal and business customers who entered into a package agreement. Westpac’s delivery of the packages was marred by the same issues as those that affected its delivery of the EGP Packages.
The result was that customers were overcharged and misled. As with the EGP Packages issue, this was recorded by Westpac in misleading account statements. The issue affected up to 43% of eligible consumer customers and up to 32% of eligible business customers.
Westpac offered agreed pricing to small business customers who held a “Business Transact Account” (BTA) with it.
The FMA said Westpac had applied incorrect charge codes (used for pricing on the BTA accounts for many customers).
“This occurred because of internal systems errors, which relied principally on manual processes,” the FMA said.
“In the result, customers were overcharged because they did not receive the lower account maintenance fees that they were due and/or because fee waivers were not applied on certain transactions when they should have been.”
In each case, customers received an itemised statement recording the amounts Westpac had charged them during the statement periods.
These statements represented that the customers were being charged the correct rates – when they were in fact being charged at higher rates.
Westpac has provided remediation to impacted customers, the FMA said.
The FMA’s head of enforcement, Margot Gatland, said Westpac’s issues stemmed from deficiencies in its systems that meant the bank failed to deliver to them contractually agreed discounts.
“Westpac used preferential pricing to attract and retain customers, without having systems that could reliably deliver on those promises,” she said.
FMA acknowledged Westpac’s full co-operation throughout the FMA’s investigation, and the work it undertook to remedy the issues.
The FMA said a penalty hearing before the High Court will take place “in due course”.
In a statement, Westpac said the FMA had proceedings against the bank, with a hearing likely some time in 2025.
“The matter relates to historical issues where we did not deliver benefits fully to some customers under two types of product packages (Employee, Gold and Platinum Packages and Association Packages), and some incorrect pricing for some customers who had Business Transact Accounts,” a bank spokesperson said.
“Westpac self-reported these issues to the FMA and has been providing updates to them in relation to customer remediation as well as co-operating with their investigation.
“All customers impacted by the packages issue have been remediated and we have cooperated fully and openly with the FMA on their investigation,” the spokesperson said.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.