Kookmin Bank has committed to refunding more than $11 million to affected borrowers in New Zealand following a Commerce Commission investigation.
As part of the settlement agreement entered into with the Commission, Kookmin admitted to failing to ensure that it provided compliant initial disclosure about its home and personal loans between 2015 and 2021, breaching obligations under the Credit Contracts and Consumer Finance Act (CCCFA) across nearly 500 contracts.
Commerce Commission Chair, John Small, says this created a risk of consumer harm, with many borrowers potentially making uninformed borrowing decisions, or not understanding their hardship, cancellation and dispute resolution rights under the contract.
Under the CCCFA, lenders have obligations to provide key information (disclosure) to borrowers before they enter a loan – such as interest rates and fees, cancellation rights and what the borrower can do in the event of financial hardship.
“These obligations are in place to ensure that borrowers can make informed decisions before entering contracts, reducing the risk for financial harm,” Dr Small says.
The South-Korean registered bank operating in New Zealand has admitted to the breaches through a settlement agreement with the Commission and signed court-enforceable undertakings committing to the payment of compensation of $11,029,020.46 to affected borrowers.
Dr Small says that as with all businesses, banks must have the processes in place to ensure they are complying with their consumer credit obligations to prevent consumer harm.
“Banks are a key source of borrowing for consumers, with typically large sums of money involved, so it’s vital they abide by the law and are resourced to meet all of their compliance obligations.”
The Commission opened its investigation into Kookmin Bank’s compliance in November 2021, after proactively identifying that the standard disclosure documents on Kookmin Bank’s website were missing key information required by the CCCFA.
Kookmin Bank will be contacting affected borrowers as part of the settlement and enforceable undertakings. It will also provide the Commission with an interim and final report to demonstrate delivery of its refund commitments.
A copy of the settlement agreement and undertakings will be available in the case register on the Commission’s website shortly.
This action pre-dates and is unrelated to the current market study into personal banking services.
