The Commerce Commission has issued a warning to the HSBC bank over its failure to comply with the information disclosure requirements of the Credit Contracts and Consumer Finance Act 2003 (CCCFA).

HSBC self-reported the matter to the commission following a routine audit of its business in New Zealand. HSBC identified six occasions between 2014 and 2018 when it failed to disclose an interest rate increase to borrowers. The failures affected 225 loans and 180 borrowers.

The commission says HSBC likely breached the requirements of the CCCFA for lenders to disclose changes following the exercise of a contractual right or power.

“HSBC advised the commission these failures were due to inadequate internal manual processes and failure to identify errors in a timely way,” says  Commission Chair Anna Rawlings.

“The disclosure requirements are there to protect consumers. They ensure that lenders provide essential information about a loan when it is first taken out or, as in this case, when the lender makes a change to the loan, as allowed in the contract. Lenders must fully and accurately inform borrowers about such changes and within the required time limit. HSBC failed to do so in relation to these cases.”

HSBC has written to borrowers providing full particulars of the change following the interest rate increase in 2018 and made changes to its processes including moving to automated disclosure processes where possible. It has also provided compensation to affected borrowers totalling about $7,000.

“In light of the actions already taken by HSBC and the relatively small number of affected borrowers, the Commission decided that a warning was appropriate in this case. We note HSBC’s pro-active conduct in self-reporting the matter and its subsequent co-operation with our investigation,” says Ms Rawlings.