Commerce Commission v TSB Bank Limited

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-1259

[2024] NZHC 2400

BETWEEN

COMMERCE COMMISSION

Plaintiff

AND

TSB BANK LIMITED

Defendant

Hearing:

22 August 2024

Appearances:

A D Luck and C L Euden for plaintiff

S M Hunter KC and Z A Brentnall for defendant

Date of judgment:

27 August 2024

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 27August 2024 at 11.00am.

Pursuant to Rule 11.5 of the High Court Rules.

………………………… Registrar/Deputy Registrar

Counsel/Solicitors:

S M Hunter KC, Auckland Meredith Connell, Auckland Gilbert Walker, Auckland

COMMERCE COMMISSION v TSB BANK LTD [2024] NZHC 2400 [27 August 2024]

[1]                 The Commerce Commission (the Commission) seeks declarations of and pecuniary penalties on TSB Bank Limited’s (the bank) admission of multiple breaches of the Credit Contracts and Consumer Finance Act 2003 (the Act), arising from the bank overcharging some 42,000 credit contract customers by about $3.6 million since at least mid-2015, when the 2003 Act’s responsible lending provisions took effect.

Statutory context

[2]                 The 2003 Act’s primary purpose relevantly is “to protect the interests of consumers in connection with credit contracts”,1 by — among other things — requiring creditors under credit contracts “to be responsible lenders”,2 and providing “rules about interest charges, credit fees, default fees, and payments in relation to consumer credit contracts”.3

[3]                 Section 9C(1) requires lenders to comply with lender responsibility principles, including “at all times … [to] exercise the care, diligence, and skill of a responsible lender” in dealing with borrowers.4 Section 41 requires “[a] consumer credit contract must not provide for a credit fee or a default fee that is unreasonable”. If unreasonable is to be determined with regard to whether the fee reasonably compensates the creditor for costs incurred by it, according to reasonable standards of commercial practice.5 Such indicates “a transaction-specific approach to the setting of fees”,6 focusing on “the costs incurred by the creditor in relation to the steps to which the fee relates (or the losses relating to a default)”.7

[4]                 In Sportzone Motorcycles Ltd (in liquidation) v Commerce Commission, the Supreme Court allowed:8

[A]   helpful formulation in determining the reasonableness of a fee is to ask whether the cost is sufficiently close and relevant to the steps in the lending process to which the fee relates that it can reasonably be said it was incurred

1      Credit Contracts and Consumer Finance Act 2003, s 3(1).

2      Section 3(3)(a).

3      Section 3(3)(c).

4      Section 9C(2)(a).

5      Sections 44 and 44A.

6Sportzone Motorcycles Ltd (in liquidation) v Commerce Commission  [2016] NZSC 53, [2016] 1 NZLR 1024 at [111].

7 At [112].

8 At [113].

in relation to those steps. A similar approach should be adopted for default fees.

while acknowledging:9

The “reasonableness” standard is imprecise and difficult to apply to particular situations. Fees have to be set in circumstances where the creditor may not have precise information on its costs and will not know how many transactions…