(Reuters) - New Zealand’s commerce commission has sued Westpac’s local arm (WBC.NZ) for not revealing key terms to thousands of credit card clients, in the latest sign of heightened regulatory scrutiny for Australian banks operating across the Tasman Sea.
The move underlines a tougher operating environment for Australian banks in New Zealand as regulators double down on compliance after remedial rules proposed by Australia’s year-long inquiry were considered to have gone easy on these lenders.
Just last month, New Zealand’s deputy prime minister asked the chairman of the local unit of Australia and New Zealand Banking Group (ANZ.AX), among Australia’s “Big Four” banks, to step down on concerns about how the lender is run.
“If you’re looking at the behavior of banks in Australia, it’s no question that investors in New Zealand who have been borrowing from them would be scrutinizing things,” James McGlew, executive director of corporate stockbroking at Argonaut, said.
New Zealand’s Commerce Commission said it was seeking return of costs and statutory damages to affected borrowers from the local arm of Westpac, the second-largest lender in Australia.
“This case is important for clarifying the scope of lender liability to borrowers, in a situation where thousands of customers were not provided with initial disclosure required under the law,” Commission Chair Anna Rawlings said.
The watchdog said in a statement that Westpac reported last year about its failure to disclose key details to 19,000 personal credit card customers when they first took out their credit card between May 2017 and March 2018.
A Westpac spokesman said the lender had discovered in March last year that disclosure documents had not been sent to 19,365 new credit card customers due to an error during a systems upgrade and had “proactively notified the Commerce Commission”.
“We also refunded fees and interest charges to customers who were in default, and have made changes to make sure this issue is not repeated,” the spokesman told Reuters, declining to comment further as the case is before the courts.
The bank’s chairman, Lindsay Maxsted, had previously said that Westpac’s culture can slow decision-making and dilute accountability, citing an internal report.
Reporting by Devika Syamnath and Aditya Soni in Bengaluru, adiitional reporting by Ambar Warrick; Editing by Himani Sarkar