Bank of New Zealand (BNZ) has admitted breaching fair dealing rules by misleading customers on how interest was calculated on some non-profit accounts.

BNZ has agreed to pay $2.6 million to the Crown through an enforceable undertaking.

The company updated its terms and conditions in 2014 to state that interest would be calculated daily. However, from December 2014 to February 2024, for the non-profit accounts, BNZ calculated interest using a different method based on the lowest monthly balance, resulting in customers receiving less interest than they were entitled to.

BNZ became aware of the issue in September 2023 after a customer query. A total of 23,103 customers were affected, with about $5.39 million in interest underpaid. BNZ self-reported the issue to New Zealand’s Financial Markets Authority (FMA) and has remediated affected customers, paying approximately $5.44 million, including use of money interest.

BNZ admitted that it made misleading representations in its terms and conditions and customer statements about how interest would be calculated, breaching sections of the Financial Markets Conduct Act relating to false or misleading conduct.

BNZ has also made a commitment to developing and maintaining effective policies, processes, systems and controls to support good customer outcomes and prevent issues of this kind from occurring in the future. This reflects the broader expectations now applying under the Conduct of Financial Institutions (CoFI) regime, which requires financial institutions to have effective fair conduct programmes and to treat consumers fairly.