More than 23,000 accounts affected as FMA flags CoFI obligations for all lenders
The Bank of New Zealand has admitted that its terms and conditions told customers one thing while its systems did another — a nine-year discrepancy that left more than 23,000 non-profit account holders receiving less interest than they were entitled to.
Under the terms BNZ updated in 2014, interest was to be calculated daily. Instead, from December 2014 to February 2024, the bank applied interest based on the lowest monthly balance, a method that consistently produced lower returns for customers. The discrepancy persisted before a customer query in September 2023 prompted BNZ to investigate.
In total, 23,103 customers were underpaid approximately $5.39 million in interest they were entitled to receive. BNZ self-reported the issue to the FMA, remediated all affected customers, and paid approximately $5.44 million including use-of-money interest. It has also agreed to pay $2.6 million to the Crown through an enforceable undertaking.
FMA draws a clear line on terms and communications
FMA Head of Enforcement Margot Gatland was direct about what the case represents.
"Financial institutions must ensure their terms and customer communications are accurate and reflect how products work in practice. In this case, BNZ's representations about how interest was calculated were inconsistent with the actual approach taken, leading to customer harm," Gatland said in a media release.
BNZ CEO Dan Huggins accepted the FMA's findings and apologised to affected customers.
"Once we became aware of the issue, we commenced a review, self-reported to the FMA, and took the product off sale," Huggins said in a media release, adding that all affected customers had been remediated and the bank was committed to preventing similar issues in future.
Gatland acknowledged BNZ's cooperation throughout the investigation and noted the remediation steps already taken, including updated terms, the withdrawal of the affected accounts from sale in February 2025, and the migration of existing customers to new products.
What it means under CoFI — and for brokers
The FMA explicitly connects the outcome to the broader expectations now applying under the Conduct of Financial Institutions regime. The BNZ undertaking, the release states, "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."
For advisers, it is a timely reminder that CoFI obligations apply to how products actually work — not just how they are described.
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