System failures led to millions in customer overcharges
Westpac, New Zealand’s fourth-largest bank by total assets, has been ordered to pay a $3.25 million penalty after admitting to misleading conduct and overcharging more than 24,000 customers due to system deficiencies and broken pricing promises.
FMA investigation finds widespread misrepresentations
The penalty follows civil proceedings brought by the Financial Markets Authority in the High Court in Auckland in December 2024.
According to FMA, Westpac breached fair dealing provisions under the Financial Markets Conduct Act 2013 (FMCA), resulting in $6.35 million in overcharges across 24,621 affected customers.
The bank admitted to making false representations regarding several historic issues, including:
- Failing to deliver advertised discounts under employee, gold, and platinum (EGP) packages
- Not applying benefits under other advertised personal and business banking package arrangements
- Failing to honour agreed pricing for business customers with a business transact account
FMA: “Bank failed to deliver on promises”
FMA head of enforcement Margot Gatland (pictured) said Westpac’s misconduct was the result of internal system weaknesses, not deliberate intent.
“Westpac’s issues stemmed from deficiencies in its systems that meant the bank failed to deliver contractually agreed discounts to their customers,” Gatland said. “Westpac used preferential pricing to attract and retain customers, without having systems that could reliably deliver on those promises.”
She added that Westpac cooperated fully with the investigation and has now remediated all affected customers.
“The FMA acknowledges Westpac’s full cooperation throughout the FMA’s investigation, and the work it undertook to remedy the issues,” Gatland said.
“The $3.25 million penalty against Westpac reflects the number of customers affected. The relationship between financial institutions and their customers must be one of trust. Customers should rightfully expect to be treated fairly and that agreements between the two parties will be honoured.”
High Court judge notes lack of intent but poor controls
In delivering the penalty decision, Justice Geoffrey Venning acknowledged that Westpac’s misconduct was not deliberate, but systemic failures were at the core of the issue.
“I accept Westpac’s submission there is no suggestion that its conduct was deliberate or wilfully misleading, nor that there was any intention to intentionally deprive customers of benefits,” Venning said.
“While it had in place systems, the systems were insufficient.”
The ruling underscores the importance of reliable internal controls and pricing systems in maintaining customer trust and regulatory compliance in the financial sector.
Westpac confirms remediation and closure of affected products
“Westpac co-operated fully with the FMA’s investigation, and we are pleased to have resolved the matter,” the bank said.
