Legacy systems are no excuse, the court said
The High Court has ordered TSB Bank to pay an $877,500 penalty for responsible lending failures that spanned more than eight years and potentially affected 29,099 borrowers.
In Commerce Commission v TSB Bank Ltd [2026] NZHC 3163, handed down on 14 October 2026, the court imposed the lowest figure in the $877,500–$910,000 range that the Commerce Commission (the Commission) and the bank jointly proposed. TSB admitted breaching the lender responsibility principles in s. 9C of the Credit Contracts and Consumer Finance Act 2003, and the court made declarations of breach.
New Zealand’s seventh-largest bank by assets identified the problems after starting a compliance review in 2021 and self-reported them to the Commission. Inadequate overdraft controls meant the bank could not confirm it always considered and discussed suitability and affordability with borrowers. Some borrowers did not receive overdraft statements, and system settings wrongly charged a $10 monthly fee on balances left owing after some overdrafts expired or their limits were removed. Joint borrowers at different addresses were not sent disclosure statements, former staff were not notified in advance when their discounted card rate ended, and some Premier Cheque customers paid a card fee that the bank should have waived.
The court called it a serious case of systematic failure lasting years. It said that even if legacy systems caused the problems, banks should keep pace with evolving obligations, including by investing in compliance.
TSB was “a large, well-established and well-resourced entity that should have done better,” the court said.
Still, the court found that the likely informational harm was lower than in comparable cases, including a case against Westpac. The breaches centred on disclosure and notification failures, often of information customers already knew, rather than flawed lending assessments. Direct overcharges totalled $55,488 in the penalty period, which began when the court’s penalty power took effect on 20 December 2019. The court added that TSB’s conservative $1.727 million remediation program likely overstated customer harm.
The court adopted a $1.35 million starting point, against a maximum of $3 million for the five causes of action. It applied a 35 percent discount for TSB’s self-report, full cooperation, early admissions, and extensive remediation.
The court accepted that TSB had shown a commitment to compliance, so the penalty did not need to deter the bank itself. The amount still mattered for general deterrence, so that all lenders know that they will face “meaningful consequences” if they fail to meet their obligations to customers.
The court did not treat an earlier $2.47 million penalty against TSB, imposed in August 2024 concerning credit and default fees, as aggravating. That conduct ran concurrently and surfaced in the same review.
