Praneeta Mahajan
Hamilton, August 29, 2024
The Commerce Commission has successfully concluded legal action against TSB Bank Limited, securing a $2.47 million penalty for the bank’s historical breaches of the Credit Contracts and Consumer Finance Act (CCCFA).
TSB Bank was found to have charged approximately $3.6 million more than legally permissible through unreasonable credit and default fees.
Fair lending practices
The penalty follows a court ruling that emphasised the importance of adhering to the CCCFA’s guidelines on fees. Anne Callinan, Deputy Chair of the Commerce Commission, stated that the court’s decision serves as a strong reminder to lenders that they cannot impose fees that exceed the actual cost of providing credit.
“These restrictions on fees are in place to protect borrowers and ensure Kiwi customers can easily compare loan offers,” she explained. “Lenders need to regularly review their fees to ensure they are reasonable and not just set and forget them.”
Justice Jagose, in determining the penalty, noted the severity of TSB’s actions, describing the bank’s prolonged imposition of unreasonable fees as a matter of “high gravity.”
He further emphasised that TSB’s breaches directly undermined the CCCFA’s goal of fostering efficient, fair, and transparent credit and default fees in consumer credit contracts.
System failures
TSB Bank admitted to system failures that resulted in customers being overcharged on 12 different credit and default fees between June 2015 and November 2021. These failures violated the CCCFA’s provisions related to credit and default fees.
In some instances, TSB charged fees without having a contractual right to do so, failing to meet the standards of care, diligence, and skill expected of a responsible lender.
In a move to address its shortcomings, TSB self-reported the issues to the Commerce Commission and has since made remediation payments totalling approximately $6 million to around 48,000 affected customers. The bank also fully cooperated with the Commission’s investigation.
Ms Callinan noted that the scale of TSB’s breaches was significant, given the large number of affected customers and the substantial harm caused by the excessive fees over a prolonged period. “The rules around credit and default fees are well-established, and we expect lenders like TSB to have proper processes in place to ensure they are complying with their obligations under the CCCFA,” she added.
The court’s decision reinforces the need for all financial institutions to maintain rigorous oversight of their fee structures, ensuring compliance with the law to protect consumers from unfair financial practices.
Praneeta Mahajan is an Indian Newslink reporter based in Hamilton.
