Six years of fee errors hit 7,309 TSB business customers, FMA finds
The Financial Markets Authority (FMA) has issued a formal warning to TSB Bank after the bank charged fees on business cheque transactions that its own terms and conditions did not allow for.
A six-year gap between policy and practice
Between 30 November 2017 and 20 November 2023, TSB charged a $0.25 fee on certain business cheque transactions that should have been fee-free. The error stemmed from a November 2017 update to TSB's Business Cheque terms and conditions, intended to clarify fee structures, which inadvertently omitted some transaction types from the exemption. The bank's systems continued charging the fee regardless, creating a mismatch between what customers were told and what they were actually charged that persisted for six years.
The error affected 7,309 customer accounts. TSB has since repaid a total of $1.73 million, covering the original fees and related interest, plus compensation for the time customers were out of pocket.
FMA points to systems and process failures
Trish Millward, FMA acting head of perimeter and response, said the case highlighted a broader obligation for financial institutions to ensure operational changes actually reach customers as intended.
"Financial institutions need to ensure their systems and processes support fair customer outcomes," Millward said in a media release.
The regulator noted that TSB identified the issue internally in August 2023 and stopped charging the fee that November, but did not notify the FMA verbally until December 2024, with written notification following in February 2025. The FMA said the warning reflected the extended overcharging period, the number of customers involved, and the delays in reporting and remediation, balanced against TSB self-reporting the issue and working constructively with the regulator.
The warning lands as TSB's ownership is set to change
The FMA's warning comes just over a week before a pivotal vote on TSB's future: Heartland Bank's proposed $620 million acquisition of TSB goes to a Heartland shareholder meeting on 30 September, with the two banks set to merge into TSB Heartland Bank if approved, and completion targeted for December.
Case worth flagging to business clients
Fee terms can shift with little visible change to day-to-day banking, and clients affected by systemic errors may still be entitled to remediation years later. TSB's $1.73 million repayment — $1,425,127 in fee refunds, $10,404 in interest, and $299,269 in compensation — is a useful reference point for fee-dispute queries, and worth flagging to any business clients banking through TSB given its ownership may change within months.
Stay informed with the latest housing market trends and mortgage insights — subscribe to our free daily newsletter.
