Westpac New Zealand has admitted to mistreating its customers, leading to significant overcharges amounting to $6.35 million. This acknowledgment came during civil proceedings initiated by the Financial Markets Authority (FMA) at the High Court in Auckland, affecting more than 24,000 personal and business customers.
The FMA highlighted serious breaches of fair dealing provisions under the Financial Markets Conduct Act 2013, noting the bank failed to deliver advertised benefits associated with various banking packages. Westpac admitted to making misleading representations concerning its Employee, Gold, and Platinum packages, within which customers were entitled to receive discounts and preferential rates.
According to the financial authority, many customers did not receive the benefits they were due when they engaged with Westpac’s services. The FMA specified, "When customers entered package agreements, Westpac staff had to manually record notes to confirm eligibility. When eligible customers acquired additional products, the bank had no process to check if benefits were applied correctly." This oversight led to significant misunderstandings and financial discrepancies.
The issues extended beyond just the management of package benefits. The FMA reported up to 31% of eligible customers experienced overcharges due to systemic failures. Customers were sometimes incorrectly informed they were being charged the right rates, when actually they were not receiving the correct discounts. The result was recorded as incorrect charges reflected on customer statements.
Margot Gatland, the FMA's Head of Enforcement, characterized Westpac's failures as stemming from "deficiencies in its systems". She pointed out, "Westpac used preferential pricing to attract and retain customers, without having systems capable of reliably delivering on those promises." This fundamental flaw led to confusion over policies and account management, impacting 43% of consumer customers and 32% of business customers.
The systemic issues can largely be attributed to how Westpac processed these package deals. Their reliance on manual processes made consistent service delivery difficult, leading to errors such as incorrect charge codes applied to accounts, especially for small business customers holding Business Transact Accounts. All these factors contributed to the mismanagement of account maintenance fees as well as the inappropriate application of fee waivers.
"The issues were frequently overlooked by Westpac," the FMA reported, stressing the significant manual record-keeping flaws contributed to 31% of overcharged eligible users. The FMA observed, "Misleading pricing information was displayed... implying benefits had been applied where they had not."
Westpac has publicly acknowledged these failures and disclosed the steps it has taken to address them. A spokesperson for the bank stated, "All customers impacted by the packages issue have been remediated. We have cooperated fully and openly with the FMA on their investigation." This has involved keeping the regulator updated and providing notifications related to customer remediation efforts.
Following Westpac's self-reporting of the issues to the FMA, the regulatory body brought the matter to civil proceedings. Both parties have come to agree on terms to resolve the situation, though the specific penalties will be decided by the High Court, which is anticipated to convene later this year.
"The FMA acknowledges Westpac’s full cooperation throughout the investigation and the work it undertook to remedy the issues," Margot Gatland indicated, reinforcing the importance of transparency and accountability among financial institutions.
Westpac New Zealand operates as part of the larger Australian Westpac Banking Corporation, one of the key banking players serving New Zealand’s consumer and business market. The overcharges and subsequent fallout represent not just an operational misstep for Westpac, but also highlight overarching regulatory concerns about consumer protection and corporate accountability within the financial services sector.
This incident is yet another wake-up call for banks, emphasizing the need for refined systems and practices to safeguard customers against deceptive practices and to uphold the integrity of the banking industry as it continues to operate under heightened scrutiny. Westpac's acknowledgment of its mistakes and commitment to remedying them sends a message to all financial institutions about the importance of delivering on promises made to customers.
