Westpac New Zealand has acknowledged overcharging 24,621 customers a total of NZ$6.35 million due to systemic issues in applying discounts and benefits. The Financial Markets Authority (FMA) has initiated court proceedings against the bank for these failures, which have prompted Westpac to agree to compensate affected customers.
Systemic Failures in Discount Programs
The bank admitted to making misleading representations about discounts under its Employee, Gold, and Platinum packages, along with other business banking services. These failures resulted from manual processing errors and inadequate system controls that did not consistently apply the promised benefits.
“Westpac’s problems arose from poor system controls that failed to ensure customers received their agreed discounts,” said Margot Gatland, Head of Enforcement at the FMA. “The bank used preferential pricing to attract customers but lacked reliable processes to deliver on those promises.”
Westpac’s internal processes relied on manual record-keeping, requiring staff to track customer eligibility for package benefits. This flawed approach led to up to 31% of eligible customers missing out on discounts for additional products and services.
Impact on Small Business Clients
Small business customers with Business Transact Accounts were among the hardest hit. Errors in charge codes caused inflated maintenance fees and denied transaction fee waivers. Account statements inaccurately displayed these overcharges as legitimate fees.
Despite the failures, the FMA acknowledged Westpac’s cooperation during the investigation and its efforts to address the issues. The bank has committed to remediating the affected customers as part of its compliance improvement measures.
Regulatory Challenges for Westpac
Westpac Banking Corporation has faced several regulatory challenges in recent years. In 2020, the Australian Transaction Reports and Analysis Centre (AUSTRAC) imposed a record $1.3 billion fine on the bank for breaches of anti-money laundering and counter-terrorism financing laws. This penalty highlighted significant compliance failures within the organization.
In January 2024, the Australian Federal Court ordered Westpac to pay a $1.8 million fine for unconscionable conduct related to a $12 billion interest rate swap transaction. This deal, the largest in Australian financial market history, involved a consortium acquiring a majority stake in Ausgrid from the New South Wales Government.
Westpac’s recent admission in New Zealand adds to its ongoing challenges as the bank works to rebuild trust and strengthen its compliance framework in the Oceania region.
