TSB repay $470k in overcharged break fees

TSB will have to repay about $470,000 to customers who were mistakenly overcharged for terminating fixed-term mortgage lending agreements.

The bank identified three errors in the way it calculated the fee it charges for early termination, known as a break fee. These errors led to some customers being overcharged and some being undercharged. A spokeswoman for TSB said the 2800 estimated customers affected had an average refund amount of $170.

TSB said the incorrect break fee calculation failed to include the present value of the interest forgone, it did not use the correct lending rates at the time of repayment and excluded any principal amortisation of the loan when making partial early repayments.

It reported itself to the Commerce Commission last year when the errors were identified. The banks will recalculate the break fees and refund customers that were affected between 2008 and February 2016.

TSB chief executive Kevin Murphy said the bank regularly assessed its products and services that had a calculation requirement and the miscalculation was ‘‘deeply disappointing’’.

Commerce Commission commissioner Anna Rawlings said TSB would certify to the commission when the necessary customer refunds had been made.

‘‘TSB is paying refunds to affected customers and is writing to customers who are entitled to a refund. It is also using its website to alert customers that it had inadvertently overcharged break fees on some affected loans.’’

TSB fully co-operated with the Commerce Commission investigation and it said the break fee calculation errors were unintentional. The bank will contact customers who are entitled to a refund.

A higher number of customers were undercharged but TSB is not seeking to recover that money from those customers.

Any customer who thinks they are entitled to a refund and who has not heard from TSB by the end of January, should contact TSB.

Customers who were charged a break fee of less than $400 between October 1, 2008 and February 28, 2013 will need to contact TSB to confirm if they are entitled to a refund.