TSB Bank Fined NZ$2.47 Million for Historic CCCFA Breaches

Highlights:

• NZ$2.47 Million Penalty: TSB Bank (NZX: TSB) has been fined NZ$2.47 million for violating the Credit Contracts and Consumer Finance Act (CCCFA) by overcharging customers through unreasonable credit and default fees.
• Systematic Overcharging: The bank was found to have charged NZ$3.6 million more than lawful limits, impacting 3,701 loan accounts with 104,284 excessive fees over several years.
• Remediation and Cooperation: TSB has made approximately NZ$6 million in remediation payments to 48,000 affected borrowers and fully cooperated with the Commerce Commission’s investigation.

Penalties for Overcharging

TSB Bank (TSB) has been hit with a NZ$2.47 million penalty for violating the Credit Contracts and Consumer Finance Act (CCCFA), marking what is believed to be the first prosecution under this Act. The Commerce Commission accused TSB of overcharging NZ$3.6 million through unreasonable credit and default fees, including excessive charges on credit cards and revolving credit facilities.

Systematic Overcharging Identified

Justice Pheroze Jagose’s judgment highlighted that TSB imposed 104,284 unreasonable fees across 3,701 loan accounts, totaling NZ$980,259 in overcharges. These fees, according to the judgment, did not reflect reasonable compensation for the bank’s services and were considered a persistent contravention over many years.

Regulatory Response and Remediation

Anne Callinan, deputy chair of the Commerce Commission, emphasized that the decision underscores the importance of fair fee practices. TSB admitted to system failures resulting in improper charges from June 2015 to November 2021 and has since made approximately $6 million in remediation payments to 48,000 affected customers. The bank fully cooperated with the investigation and self-reported the breaches.

Callinan stated, “Lenders need to regularly review their fees to ensure they are reasonable and not just set and forget them.” The Commission views TSB’s breaches as serious due to the extensive number of affected customers and the prolonged duration of the violations.

Looking Forward

This penalty serves as a crucial reminder to all lenders about adhering to CCCFA standards, ensuring transparency and fairness in credit and default fee structures.

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