Westpac to pay $5.1 million over credit card fees
29 September 2006/046
Westpac to pay $5.1 million over
credit card fees,
Kiwibank also to face charges
Westpac has become the fourth 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 19 charges of breaching the Fair Trading Act.
Westpac has been fined a total of $570,000 in the Auckland District Court and agreed to pay $4.5 million in compensation to customers who made foreign currency transactions on their cards. Westpac will also pay $80,000 in costs to the Commission.
The Commerce Commission also announced today that it is prosecuting Kiwibank on similar charges, bringing to ten the total number of bank and credit card companies prosecuted by the Commission over the foreign exchange fees.
Westpac admitted that foreign currency exchange fees were charged but not adequately disclosed during the period from 17 April 2002 to 2 December 2004. Consumers will be contacted by Westpac if they are affected and most should receive their compensation by January 2007.
Commerce Commission General Manager Geoff Thorn said that some people had commented that non-disclosure of the charges was common practice in the New Zealand banking industry at the time.
“The Commission is not swayed by that argument,” Mr Thorn says. “The behaviour clearly was widespread, but illegal actions can not be justified on the basis that ‘others were doing it too.’
“New Zealand banks continued to charge the hidden fees despite well-publicised proceedings against credit card providers in the United States for similar behaviour,” Geoff Thorn says.
“The proceedings in the US should have been enough to alert New Zealand companies to the likelihood that such non-disclosure was not international best practice and was likely to breach the Fair Trading Act.”
“These are big corporations, they have access to the best legal advice and should have sophisticated compliance systems in place to ensure that they do not break the law,” says Mr Thorn.
Mr Thorn urged other businesses to consider whether they had adequate compliance programmes in place to ensure that they were operating within the law.
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 Westpac’s terms and conditions. Customers paid fees of just over 2.5% of the total transaction.
Under the settlement reached today Westpac will be responsible for contacting affected cardholders, including those who are no longer customers. The $4.5 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 Kiwibank, 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 $550,000 were imposed on the BNZ in July for similar behaviour and BNZ agreed to pay compensation of $5 million to affected customers. 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 paid. In each case, the banks agreed to pay $80,000 in costs to the Commission. 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.