Understanding Bank Errors and Overcharging in New Zealand
Bank errors leading to overcharging can occur in various forms, such as incorrect transaction fees, duplicate charges, or miscalculated interest. In New Zealand, consumers are protected by specific legislation concerning the provision of services and fair trading practices, which apply to banking services.
Consumer Guarantees Act 1993
The Consumer Guarantees Act 1993 (CGA) provides a set of guarantees to consumers when they acquire goods or services from a supplier in trade. Banking services are considered "services" under this Act [Source: Consumer Guarantees Act 1993, s 2 (definition of "services")].
Services to be rendered with due care and skill
When a consumer acquires services from a supplier, the supplier guarantees that those services will be rendered with reasonable care and skill [Source: Consumer Guarantees Act 1993, s 28]. If a bank overcharges a customer due to an error, this could be considered a failure to provide services with reasonable care and skill.
Remedies for failed services
If the services provided by the bank fail to comply with the guarantee of reasonable care and skill, the CGA provides remedies. If the failure can be remedied and is not of a "substantial character" (meaning it does not make the service unfit for its common purpose or depart significantly from the consumer's reasonable expectations [Source: Consumer Guarantees Act 1993, s 32A]), the consumer may require the bank to remedy the failure within a reasonable time [Source: Consumer Guarantees Act 1993, s 32(a)]. If the bank fails to do so, the consumer may either have the failure remedied elsewhere and recover the reasonable costs from the bank, or cancel the service contract [Source: Consumer Guarantees Act 1993, s 32(b)].
If the failure cannot be remedied or is of a substantial character, the consumer may cancel the service contract or obtain compensation from the bank for any reduction in value of the service below the price payable [Source: Consumer Guarantees Act 1993, s 32(c)].
Consequential loss
In addition to the remedies above, a consumer may also obtain damages from the bank for any loss or damage to the consumer resulting from the failure, provided that the loss or damage was reasonably foreseeable as liable to result from the failure [Source: Consumer Guarantees Act 1993, s 33].
Fair Trading Act 1986
The Fair Trading Act 1986 (FTA) aims to protect consumers from misleading and deceptive conduct and unfair trading practices by businesses, referred to as "persons in trade." A bank is considered a person in trade.
Misleading or deceptive conduct
No person in trade shall engage in conduct that is misleading or deceptive or is likely to mislead or deceive [Source: Fair Trading Act 1986, s 9]. While an unintentional error leading to overcharging may not always constitute intentional deception, actions or omissions related to the error, such as representations about account balances, transaction accuracy, or responses to queries, could potentially fall under this provision if they are misleading.
False or misleading representations
The FTA specifically prohibits a person in trade from making false or misleading representations concerning the price of services [Source: Fair Trading Act 1986, s 13(g)]. If a bank provides incorrect information about charges or deductions that results in an overcharge, this could be considered a false or misleading representation.
Unsubstantiated representations
It is also prohibited for a person in trade to make an "unsubstantiated representation" [Source: Fair Trading Act 1986, s 12A]. An unsubstantiated representation is one that the person making it does not have reasonable grounds for at the time it is made [Source: Fair Trading Act 1986, s 12A(2)]. If a bank asserts a charge is valid without reasonable grounds, this provision could be relevant.
Enforcement and remedies under the FTA
The Commerce Commission is responsible for enforcing the Fair Trading Act. However, consumers can also take private action in court to seek remedies such as damages, injunctions, or orders to vary or cancel a contract [Source: Fair Trading Act 1986, s 43].
Steps to Address an Overcharge
When an individual identifies an overcharge from their bank, the usual process involves first directly contacting the bank to report the error and provide any relevant documentation. Most banks have an internal complaints resolution process for addressing such issues. If the matter is not resolved satisfactorily through the bank's internal process, consumers may then be able to escalate their complaint to an independent external dispute resolution scheme, such as the Banking Ombudsman Scheme, which provides a free and independent service for resolving complaints between customers and their banks.
When to Seek Independent Legal Advice
If an individual believes their rights under the Consumer Guarantees Act 1993 or the Fair Trading Act 1986 have been breached by a bank error leading to overcharging, and they have exhausted the bank's internal complaints process and external dispute resolution options without resolution, seeking independent legal advice may be considered. Resources such as Community Law Centres and the Banking Ombudsman Scheme can provide general information and assistance. Individuals can contact Community Law Centres for free advice.
Key Resources
- Consumer Guarantees Act 1993: https://www.legislation.govt.nz/act/public/1993/0091/latest/whole.html
- Fair Trading Act 1986: https://www.legislation.govt.nz/act/public/1986/0121/latest/whole.html
- Commerce Commission (Consumer Protection): https://www.comcom.govt.nz/consumers
- Banking Ombudsman Scheme: https://bankomb.org.nz/