BNZ guilty plea on card fees: $5 mil compensation
Issued 18 July 2006/008
BNZ pleads guilty over card fees: $5 million in compensation, $550,000 fine
The BNZ has become the third major bank to plead guilty to breaching the Fair Trading Act by failing to properly disclose fees charged for overseas currency transactions on its credit and debit cards. The company pleaded guilty to 21 representative charges of breaching the Fair Trading Act.
BNZ has been fined a total of $550,000 in the Auckland District Court and has agreed to pay $5 million in compensation to customers who made foreign currency transactions on their cards. $80,000 in costs was awarded to the Commission.
The Court found that foreign currency exchange fees were charged but not adequately disclosed during the period from February 2002 to May 2004. Consumers will be contacted by BNZ if they are affected and most should receive their compensation by November this year.
The Commerce Commission investigated after consumers complained that fees were being charged on top of the exchange rate and were not adequately disclosed. The fees were not shown on bank statements, and were not adequately disclosed in BNZ’s terms and conditions. Customers paid fees of just over 2% of the total transaction.
Commerce Commission Chair Paula Rebstock said the result was a victory for New Zealand consumers, many of whom would have unknowingly paid the currency transaction charges.
The result was also important for competition in New Zealand said Ms Rebstock. “While fees like these remain hidden, banks have no incentive to offer lower fees.
“The Commission considers that disclosing the fees properly will ultimately result in more competition and lower fees for customers.”
Ms Rebstock noted that, since the Commission’s investigation began, banks had changed their approach and begun showing the fees charged on overseas currency transactions. She urged other businesses to consider whether they were adequately disclosing any fees or charges they impose on customers.
“Full disclosure of fees and charges remains a priority enforcement area for the Commission,” said Ms Rebstock.
“With its dual responsibilities for the Fair Trading Act and Credit Contracts and Consumer Finance Act, the Commerce Commission is particularly aware of the need for adequate disclosure of fees in the finance sector, but other businesses should also take note that the courts will look very seriously on any failure to inform customers fully about fees and charges.”
Under the settlement BNZ will be responsible for contacting affected cardholders, including those who are no longer customers. The $5 million will be placed in an account, to be monitored by an independent auditor. Once all affected customers who can be contacted have been compensated, any money remaining will be donated to a consumer organisation.
The Commission’s prosecutions of Westpac, ASB, TSB, American Express, Diners Club and The Warehouse Financial Services continue, and the Commission will not comment on the ongoing proceedings.
The settlement does not stop customers from taking their own action under the Fair Trading Act.
Fines totalling $1.325 million were imposed on the ANZ National Bank in March for similar behaviour. In that case, customer compensation of $10 million was required. The ANZ and National banks were separate organisations at the time of the offending but had become a single company by the time the case came to Court.