TSB Bank charged thousands of business customers a fee its own terms and conditions did not allow for six years, and has now been publicly warned by the Financial Markets Authority.
The regulator said on 21 September that between 30 November 2017 and 20 November 2023 the New Plymouth-based bank charged a 25 cent fee on some business cheque account transactions that should never have attracted it. The error hit 7,309 customer accounts. TSB has paid back $1.73 million, covering the fees themselves, related interest and charges, and compensation for the time customers were without their money.
The overcharging began with a change that was meant to help customers. In November 2017 TSB rewrote the wording of its Business Cheque terms and conditions to make its fees clearer. The new wording left out some transactions, but the bank’s systems kept charging for them anyway. According to the FMA, what customers were told they would pay and what they actually paid did not match for an extended period.
“Customers should be able to trust that a bank charges them only what its terms and conditions say it will,” said Trish Millward, the FMA’s acting head of perimeter and response. “TSB’s customers had no practical way to check these fees for themselves, and the overcharging went on for six years.”
Millward said the lesson reached beyond one bank. “When financial institutions make changes to their terms and conditions, they need to ensure that their systems can deliver those changes to their customers,” she said.
The breakdown of the repayment shows how small charges add up. The FMA’s notes put total remediation at $1,734,800. Of that, $1,425,127 was straight fee refunds, $10,404 was related interest and fees, and $299,269 was compensation for the use of customers’ money. At 25 cents a time, the fee refunds alone represent roughly 5.7 million wrongly charged transactions, or an average of close to $195 in fees for each affected account over the six years.
That is the kind of charge few small business owners would ever notice on a statement. A quarter here and there on a busy trading account looks like the normal cost of banking, which is exactly the point the regulator made when it said customers had no practical way to check.
The timeline of what happened after the problem was found is the part the FMA singled out. TSB identified the issue internally in August 2023 and stopped charging the fees on 20 November 2023. But it did not tell the FMA verbally until December 2024, and did not notify the regulator in writing until February 2025. That is about 16 months between finding the fault and first telling the regulator, and 18 months before it did so in writing.
The FMA said the warning reflected the long period of overcharging, the number of customers affected, and delays in reporting the issue and paying the refunds. It also gave the bank credit. The regulator acknowledged that TSB reported the problem itself, worked constructively with the FMA, and has largely finished reimbursing customers.
TSB told RNZ it acknowledged the warning. “We are sorry to the customers affected. We have refunded impacted customers and strengthened our processes to ensure our fees are clearly described and charged correctly,” the bank said.
A public warning is one of the lighter tools the FMA has. It is issued under section 9(1)(a)(ii) of the Financial Markets Authority Act 2011 and carries no fine. Its force is reputational, putting on the public record that a regulated business fell short. For a bank, that record matters, particularly one in the middle of a sale.
TSB is owned by the Toi Foundation, the Taranaki community trust, and is being sold to Heartland in a deal worth about $620 million. A Taranaki community group went to the High Court in August to try to stall the sale, but its application for an injunction was dismissed, and the Toi Foundation trustees approved the transaction on 27 August 2026. Heartland shareholders are due to vote on the deal at a special meeting on 30 September, and Heartland says the merger is expected to be completed no earlier than December 2026, subject to regulatory approvals.
There is no suggestion the fee problem affects the sale. The overcharging ended almost three years ago and the refunds are largely done. But the warning lands in the same month as other FMA work putting bank pricing under a brighter light. Last week the regulator updated data showing how the major banks passed Reserve Bank cash rate changes on to borrowers and savers, finding floating mortgage rates took the full rate hikes but only part of the cuts.
Both pieces of work point in the same direction. Banks set their prices through fine print and systems that customers cannot easily see into, and the regulator is increasingly asking them to show that what they charge matches what they promise.
For TSB’s business customers, the practical message is simple. Anyone who held a TSB business cheque account between late 2017 and late 2023 and believes they were charged but has not been refunded can contact the bank directly. The FMA said reimbursement was largely, not entirely, finished.
For everyone else, the case is a reminder that a fee too small to notice is not too small to add up. Across 7,309 accounts and six years, a quarter at a time came to more than $1.4 million.
Have you ever found a bank fee on your statement that should not have been there? Do you check your business banking charges, or trust the bank to get them right? Share your experience in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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