It says it is sorry for what happened and attributes the problem to what it called “manual processes”.
The case relates to customers who were eligible to have transaction fees waived for their personal banking accounts, but this didn't happen.
The Financial Markets Authority (FMA) has filed civil proceedings in the High Court against Kiwibank.
It says the offending happened between 2005 and 2020, and affected 35,000 Kiwibank home loan customers. The total sum involved was approximately $1.173 million.
However, since the relevant legislation only came into force in 2014, the proceedings cover only 19,000 customers and involve about $578,000.
The FMA is seeking a declaration that Kiwibank contravened fair dealing laws and an order that Kiwibank pay a pecuniary penalty to the Crown and costs.
The sum is undisclosed.