Co-operative Bank Faces High Court Over Lending Violations

The Co-operative Bank is set to face a High Court hearing following its admission of breaching lending laws by imposing excessive fees on customers. According to the Commerce Commission Te Komihana Tauhokohoko, the bank charged “unreasonable” fees to approximately 48,249 customers, violating provisions of the Credit Contracts and Consumer Finance Act.

In response to these findings, the bank has refunded and compensated affected customers, amounting to $7.2 million. The upcoming hearing will determine the financial penalties the bank will face for these violations.

Bank’s Acknowledgment and Response

Sarah Bartlett, the commission’s director for credit, emphasized the broader implications of such practices. She stated, “Charging unreasonable fees doesn’t just erode trust in the banking sector; it has a direct and tangible impact on consumers’ wallets, often hitting those least able to absorb unexpected costs.”

The bank’s chief executive, Mark Wilkshire, expressed regret over the situation, acknowledging that some of its historical practices fell short of the required standards. Wilkshire noted, “We identified the issue, self-reported it to the commission, and have worked hard to put things right for affected customers, both present and past. We’re committed to doing better for our customer-owners.”

Wilkshire also highlighted that the bank is nearing the completion of remediation for all customers impacted by these historical issues.

Details of the Violations

The commission’s investigation revealed that the Co-operative Bank charged twelve unreasonable fees across various loan types, including home loans, overdrafts, and personal loans. Most of these fees were applied between June 6, 2015, and November 30, 2021.

The bank had proactively alerted the commission regarding concerns about the fees, prompting the investigation that began in 2023. This proactive stance aligns with a broader trend initiated by the Financial Markets Authority Te Mana Tāitai Hokohoko and the Reserve Bank Te Pūtea Matua starting in 2018. Since then, several banks, including ASB, ANZ, Westpac, and Kiwibank, have reported similar issues and undertaken efforts to compensate their customers.

Bartlett noted, “Co-operative Bank’s conduct fell short of what we would expect from a responsible lender. It failed to undertake regular fee reviews and invest in adequate systems, processes, and controls to ensure it complied with the law.” Her remarks underline the importance of holding financial institutions accountable to ensure consumer protection.

As for the financial implications, Wilkshire indicated that the bank had already set aside provisions for potential penalties, suggesting that the outcome of the hearing is not expected to significantly impact the bank’s financial results for the year ending March 31, 2026.

The upcoming High Court hearing will be closely monitored as it highlights ongoing issues in the banking sector regarding compliance with consumer protection laws and the financial accountability of institutions.