BNZ warned over responsible lending and disclosure failures

The Bank of New Zealand (BNZ) has been warned by the Commerce Commission over likely responsible lending breaches and failures to provide timely and accurate information to borrowers.

In the Commission’s view, BNZ likely breached responsible lending and disclosure obligations under the Credit Contracts and Consumer Finance Act 2003 (CCCF Act).

In late 2018 BNZ reported 15 potential breaches of the CCCF Act to the Commission. The matters reported to the Commission related to certain home loans, personal loans, credit cards and overdrafts entered into or varied between 6 June 2015 and 24 February 2017. There were 11,956 affected customers.

Following its investigation, the Commission has warned BNZ that it is likely to have breached its obligations under the CCCF Act.

“In the Commission’s view, BNZ failed to meet the requirements of the CCCF Act including by making errors when delivering information required by the Act. For example, in some cases BNZ provided incomplete or inaccurate disclosure, and in other cases disclosure was provided a day, a few days, or as many as seven months after the information should have been provided to borrowers. We expect lenders to regularly audit their systems to make sure that they can comply with consumer credit law, or quickly identify problems if they arise, fix them and provide appropriate remediation to borrowers,” said Commerce Commission Chair Anna Rawlings.

In late 2018 BNZ refunded approximately $3.8 million in interest and fees to borrowers affected by these issues.

BNZ has co-operated with the Commission throughout the investigation, and in September 2020 it refunded $350 to each borrower affected by its likely failure to meet responsible lending obligations. This amounted to a total refund of more than $1 million to more than 2,300 affected borrowers.

“BNZ has identified these matters itself and reported them to the Commission, made remediation payments to its customers and made system changes to reduce the risk of issues like this arising in the future. Taking into account those steps, and consistent with our Enforcement Response Guidelines, we have decided that it is appropriate to issue a warning to BNZ for this conduct,” said Ms Rawlings.

Background

Initial disclosure

Lenders must disclose to the borrower all the information listed in Schedule 1 of the CCCF Act which applies to the contract before the contract is entered into.

Variation disclosure

Where a loan contract is changed, the lender must provide full particulars of the changes to the borrower.

Warning letters

A warning explains the Commerce Commission’s opinion that the conduct at issue is likely to have breached the law. Only the Courts can decide whether a breach of the law has in fact occurred.

The purpose of a warning letter is to inform the recipient of the Commission’s view that there has been a likely breach of the law, to suggest a change in the recipient’s behaviour, and to encourage future compliance with the law.

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