MR No. 2015 – 04
17 February 2015
The Financial Markets Authority (FMA) has reached a settlement with Westpac regarding the sale, promotion and marketing of interest rate swaps to some rural customers.
The settlement follows the FMA’s engagement with Westpac in relation to its processes for selling and marketing interest rate swaps to rural customers from 2005 to 2012.
The FMA’s settlement agreement has been reached alongside a separate settlement between the Commerce Commission (the Commission) and Westpac, also announced today.
Under the Commission’s settlement, Westpac will make available a total of $2.47 million to the 38 eligible customers who registered their complaints with the Commission. Westpac will also pay $250,000 towards the Commission’s costs and another $250,000 to Rural Support Trusts.
Westpac has said it does not accept the Commission’s conclusions, but has admitted that some of its conduct breached section 9 of the Fair Trading Act in relation to some of its rural customers.
The FMA did not carry out a separate investigation in this case. However, arising from the Commission’s conclusions, the FMA had concerns about potentially misleading conduct by Westpac, relating to the sale and marketing of interest rate swaps to some rural customers.
The FMA acknowledges that neither its concerns nor the Commission’s conclusions have been tested in Court.
As part of the settlement agreement with the FMA, Westpac has agreed to appoint an independent third-party to review its sale, promotion and marketing of two sample products being interest rate swaps and its Notice Saver PIE.
The report from a third-party will be provided to Westpac and then to the FMA. Following consultation with the FMA, Westpac will implement the recommendations in the review, where appropriate, across all relevant products and services.
“One of the FMA’s key objectives, set out in our Strategic Risk Outlook, is to ensure that sales processes and advice services reflect the best interests of customers. This settlement is based on our concerns that consumers should receive full and accurate information when purchasing financial products or services,” said the FMA’s General Counsel, Liam Mason.
“The FMA is the regulator of conduct in this area, so the settlement also recognises our concerns about the imbalance of information that can exist between customers and financial service providers. The purpose of the independent review required by this settlement is to help ensure robust sales and advice processes are in place, including the disclosure of all relevant information, and that they meet the standards of the new regulatory framework.”
Under the Financial Markets Conduct Act 2013, from 1 April 2014 the FMA has responsibility for regulating misleading and deceptive conduct in relation to any dealing in financial products or services.
The settlement agreement is available here.
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