First prosecution under CCCFA

The prosecution is believed to be the first under the CCCFA. 

"Counsel advise this is the first determination of pecuniary penalties under the Act," Justice Pheroze Jagose notes in his judgment.

The Commerce Commission alleged TSB charged $3.6 million more than it lawfully should have through unreasonable credit and default fees.

These fees covered a variety of products including credit cards and revolving credit facilities. The latter was the biggest area of overcharging, with the bank charging $980,259 on 3,701 loan accounts which in total was 104,284 fees charged.

In his decision Justice Pheroze Jagose said "none of the bank's 35 such fees was established by reference to reasonable compensation to the bank for the costs (including losses) incurred by it in provision of the seervice for which the fee relates, according to reasonable standards of commercial practice."

He noted TSB "persistent contravention for many years."

Commerce Commission deputy chair, Anne Callinan, says the court’s decision is a reminder to CCCFA lenders that they can’t charge fees that are more than the costs of the transaction.

“These restrictions on fees are in place to protect borrowers and make sure Kiwi customers can easily compare loan offers – lenders need to regularly review their fees to ensure they are reasonable and not just set and forget them,” Callinan says.

In deciding the penalty, Justice Jagose considered “the bank’s long-term charging of unreasonable credit and default fees to be of high gravity” and that TSB’s breaches “strike directly at the Act’s objective of establishing efficient, fair and transparent credit and default fees under consumer credit contracts between creditors and responsible lenders.”

TSB admitted to system failures which saw customers charged more than they should have been across 12 credit and default fees between June 2015 to November 2021. These failures breached the CCCFA’s credit and default fees provisions. In two cases TSB charged fees that it did not have a contractual right to charge, and in doing so it fell short of the care, diligence, and skill required of a responsible lender.   

TSB self-reported the issues to the Commission and has made remediation payments of around $6 million to 48,000 affected borrowers. The bank fully co-operated with the Commission’s investigation.

Callinan says, in the Commission’s view, TSB’s breaches were serious given the large number of customers affected, the level of harm from overpaid fees, and the extensive duration of the breaches. “The rules around credit and default fees are well established and we expect lenders like TSB to have proper processes in place to make sure they’re following their obligations under the CCCFA.”