Westpac New Zealand admits overcharging 25,000 customers

The banking giant faces a hefty fine after it misled NZ customers entitled to advertised discounts and overcharged some of them.

Westpac New Zealand has accepted that it overcharged customers. Picture: Morgan Sette

Westpac’s New Zealand division has admitted overcharging nearly 25,000 customers a total of $NZ6.35m ($5.7m) by not giving advertised discounts and benefits.

New Zealand’s Financial Markets Authority launched civil proceedings against Westpac New Zealand at the country’s High Court in Auckland for not delivering advertised benefits for various banking packages across its personal and business portfolios.  Westpac’s breaches of the fair dealing provisions under the Financial Markets Conduct Act affected a total of 24,621 customers.

The ASX-listed bank, which operates the third-largest bank in New Zealand by market share, accepted that it made misrepresentations in a number of cases, including to customers who were entitled to various benefits under Westpac’s Employee, Gold and Platinum (EGP) packages but did not receive the discounts.

It also accepted that personal and business banking customers failed to receive benefits under one of Westpac’s other advertised packaged arrangements, which affected up to 43 per cent of eligible consumer customers and up to 32 per cent of eligible business customers. It also failed to honour agreed pricing for business customers who held a business transact account.

FMA head of enforcement Margot Gatland said Westpac’s problems stemmed from deficiencies in its systems. “Westpac used preferential pricing to attract and retain customers, without having systems that could reliably deliver on those promises,” she said.

“The FMA acknowledges Westpac’s full co-operation throughout the FMA’s investigation, and the work it undertook to remedy the issues.”

The financial markets regulator and Westpac have agreed to resolve the proceedings.

A penalty hearing before the country’s High Court will take place in due course.

A Westpac spokesman told The Australian that the proceedings launched by FMA concerned historical issues and were reported by the bank to the ­regulator.

“Westpac self-reported these issues to the FMA and has been providing updates to them in relation to customer remediation as well as co-operating with their investigation,” he said.

“All customers impacted by the packages issue have been remediated and we have co-operated fully and openly with the FMA on their investigation.”

The FMA said that in relation to EGP customers, Westpac staff had to manually record a note in the customer’s file to confirm their eligibility for the package benefits.

When eligible customers subsequently acquired other products or services from the bank, Westpac had no process for staff to check whether the customer was eligible for package benefits on the subsequent products and services.

Westpac frequently overlooked the point and up to 31 per cent of eligible customers were overcharged.

The overcharges were recorded in customers’ account statements (for account and card benefits) and/or their policy schedules and annual renewal letters (for insurance benefits).

Westpac accepted that it applied incorrect charge codes on the business transact account for many customers. This occurred because of internal systems errors, which relied principally on manual processes.

In each case, customers received an itemised statement recording the amounts Westpac had charged them during the statement periods. These statements represented that the customers were being charged the correct rates – when they were in fact being charged higher rates.

New Zealand’s four major banks are all controlled by Australian banks. ASB Bank is owned by the Commonwealth Bank, Bank of New Zealand is controlled by National Australia Bank, while ANZ and Westpac both have locally badged ­operations.

Westpac announced last week that it was on the hunt for a new chief financial officer after veteran banker Michael Rowland revealed he would depart the banking major in 2025, with no clear successor.

Mr Rowland’s move comes as investors watch for any further changes to Westpac’s executive bench, particularly head of the retail bank Jason Yetton, who missed out on the CEO’s role to Anthony Miller, who took charge this month.

Australian banks have come under the spotlight from regulators this year. The Australian Prudential Regulation Authority imposed a $750m capital penalty on ANZ in response to “non-financial risk management concerns”, with $250m of that added in August because of concerns about its markets team and risk and culture issues.

ANZ suffered a ‘‘first strike’’ at its AGM last week.

Westpac shares rose 2 per cent to $32.29 on Monday, in line with its sector, and taking total gains for the year to about 40 per cent since the start of the year.