The Financial Markets Authority is seeking information from the Inland Revenue Department that could reveal the extent of "concerning" KiwiSaver sales and switching practices the regulator claims are being used by banks.
The regulator's latest monitoring report on qualifying financial entities (QFEs) detailed a number of questionable methods lenders were allegedly using to woo customers in to their KiwiSaver schemes.
The FMA said it had become aware of bank staff telling customers that their credit applications would be more favourably considered if they transferred to the organisation's savings scheme.
Banks had also been asking customers if they would like to access KiwiSaver information alongside other bank account information, without explaining that this would require them to transfer to the bank's savings product, the FMA said.
It said another worrying practice involved customers being signed up for products such as personal loans and being provided a Kiwisaver transfer form alongside the other documentation, leading some customers to inadvertently transfer to the bank's scheme.
"None of these examples place the interests of the customer first," the FMA said. "The reflect poorly on the provider's attitude towards the customer or the product."
FMA director of compliance Elaine Campbell told the Herald that the information had come from a number of sources, including members of the public and rival KiwiSaver providers whose customers had switched schemes.
In order to find out how widespread such practices were, the FMA was seeking IRD data that would show how many KiwiSaver customers were switching schemes and then quickly switching back to their previous provider, Campbell said.
"That would demonstrate that the switch wasn't an informed decision -- that they perhaps didn't understand what they were doing at the time they were undertaking that transaction."
The FMA has not named any banks it is concerned about, but Campbell said that could change.
"We would probably look at what regulatory tools we have to address those behaviours at that bank, versus a naming and shaming approach," she said. "It might be that at the end of that process the bank that we're concerned with is publicly named."
New Zealand Bankers' Association chief executive Kirk Hope said banks took their regulatory obligations seriously.
"The [FMA] report includes examples of good practice and covers a range of QFEs, including non-banks," Hope said. "The report is part of a valuable ongoing process that helps identify issues and improve QFE practices. Importantly, it also helps deliver a better customer experience. Banks are all about continuous improvement and that's one of the reasons why New Zealanders rate their own banks highly."
The FMA is also concerned about an unexpectedly low number of breaches detailed in QFEs annual reports, as required by law.
"QFEs appear to be applying a materiality threshold to the reporting of breaches and only reporting those breaches that exceed the threshold," the report said. "This appears to be driven by concerns about the potential consequences of a breach of a QFE's terms and conditions. As a result, not all breaches are being reported to the FMA."