New Zealand state-owned banking group, Kiwibank, has pleaded guilty in court today to breaches of the Fair Trading Act after it was found to have misled customers over promised home loan and overdraft fees.

Kiwibank admitted the mischarges – which it said were self-reported to New Zealand’s competition regulator, the Commerce Commission – on several of its credit products were due to system and process failures, resulting in some customers not receiving the promised benefits or correct fees.

These credit products included home loans, credit cards and overdrafts.

The Commerce Commission, which pursued civil action against the bank last month, claimed the bank’s errors resulted in $7 million in incorrect fees and interest rates being charged to more than 36,000 customers over several years.

Commerce Commission deputy chair Anne Callinan claimed the mischarges stemmed from “multiple errors in Kiwibank’s manual and electronic systems, resulting in the bank misrepresenting what it owed to customers”.

In the Commission’s view, Callinan said, the breaches were “longstanding” and “systemic”, and further arguing that some charges dated back to Kiwibank’s inception in 2002.

Court documents stated that the mischarges in question occurred over a five-year period, between 31 May 2019 and 30 May this year.

Callinan in a media statement called on lenders to have in place processes to “ensure consumers are getting a fair deal and are charged what was advertised to them”.

The bank pleaded guilty to all 21 charges it faced. Each charge carries a maximum penalty of $600,000.

The Court documents stated that, on its alleged mischarges on its home lending products, “Kiwibank made representations in account statements rendered to certain home loan customers that those customers had been required to pay fees at certain amounts”.

“In doing so, Kiwibank misrepresented the amounts it was entitled to charge those customers, in that the terms and conditions applicable to those loans provided either for lower fees, or no such fees.”

A similar charge was levelled against the bank for its overdraft fees, with Kiwibank accused of misrepresenting the “preferential interest rates” notified on its website. Similarly, ‘member package agreements’, where customers were promised the option to have such “fees discounted … or to receive discounted rates” were not honoured.

Kiwibank referenced the mischarging of member package rates on a remediations page on its website, where it assured customers that it would honour these discounts “plus interest”.

“Some customers are eligible for a refund or payment for Kiwibank member package benefits they didn’t receive on a range of products including everyday accounts, term deposits, home loans, credit cards, overdrafts, personal loans and insurance. We’re making it right by making these payments plus interest,” the bank wrote.

Among the other charges pursued by the Commerce Commission related to the miscalculating of outstanding loan principals, which created a discrepancy between the final charges and the correct contractual position, as well as interest-only repayment schedules extending beyond the agreed end date.

Kiwibank chief executive Steve Jurkovich, whilst expressing his disappointment with the bank’s past mistakes, said that he was “proud of the way our team has now come together to fix the problems and make things right for our customers”.

“We proactively identified the issues, reported them to the Commerce Commission and have fully co-operated with their investigation, while at the same time carrying out a remediation programme for all affected customers,” Jurkovich said.

Kiwibank said it has agreed to a summary of facts with the Commerce Commission and is “aligned in its views on the appropriate penalty”.

Kiwibank will return to the Auckland District Court in October for sentencing.