Kiwibank apologises for freezing customer's accounts

When Bill Pearson received a courtesy call from his bank to discuss a recent transaction, he didn't expect it would end with his cards and accounts frozen for 2 days.

But that's what happened in June when, ahead of Matariki weekend, Pearson drove with his wife from Paihia to Dargaville to purchase a secondhand car.

The car, being purchased on behalf of their daughter, cost them $3,500, so Pearson opened his internet banking app and transferred the money to the seller.

On the way home, a Kiwibank representative called them, asking for confirmation that it was a legitimate transfer. "We told the guy it was," says Pearson.

Yet, when Pearson went to look at his accounts later that day, he realised he couldn't access any of them.

"All of them [were frozen]," he says. "We couldn't do anything with any of them."

What happened next

The following day, Pearson called Kiwibank and asked them to explain what had happened and fix the problem.

"I talked to a woman who said, 'The person responsible wasn't available,' so she couldn't do anything, but [she said] someone would phone me in 2 hours,” Pearson says.

When that didn't happen, Pearson called the Banking Ombudsman Scheme, a watchdog offering a complaints process for consumers.

That led to another phone call with Kiwibank, but after 50 minutes on the phone with another representative, he was told they wouldn't be able to help him.

"It sounded as if someone wasn't working that day and they didn't have any systems to deal with this … they couldn’t access the files," he says. "The woman told me they might be able to do something the next day."

In fact, Pearson's accounts were unfrozen by the end of the day. Many weeks later, he still hasn't received an explanation or an apology from Kiwibank.

What Kiwibank says

Consumer contacted Kiwibank’s media team about this incident on July 30. A few days later, Pearson received an apology and explanation about what had happened to his accounts.

In a statement supplied to Consumer NZ, Kiwibank said Pearson's accounts were frozen "while our team investigated a possible fraudulent transaction".

A Kiwibank spokesperson also confirmed that a team member had contacted Pearson to ask whether the transaction of $3,500 was legitimate as it was not typical of his spending behaviour.

Despite being told by Pearson’s wife the transaction was deliberate, Kiwibank went ahead and froze Pearson’s accounts anyway.

The spokesperson told Consumer the freeze would "typically be lifted immediately".

When asked why there was a delay in this instance, they said, "It took the team member longer than it should have ... we have apologised to the customer."

Pearson confirmed Kiwibank contacted him and apologised once Consumer had begun its inquiries.

He said he "wasn't chuffed" with their response.

Kiwibank has denied that freezing customers’ accounts by accident was a widespread issue, saying it "is not a common occurrence".

But Consumer can confirm it has happened to someone else in the past year.

What happened to a Consumer staff member

In August last year, a similar thing happened to me. Back then, I detailed how a house move left my family unable to access our accounts for an entire weekend.

Having spent a stressful Friday moving house, it wasn’t until the Saturday, when we went to buy heaters and dinner, that we realised our cards were frozen.

Whenever we swiped or tapped in our pin, we received the same message: “Please contact your bank”.

Like Pearson, we also struggled to get through to a Kiwibank representative to find out what had happened.

Also like Pearson, it wasn’t until Consumer began asking questions that an apology – and a goodwill payment of $800 - was forthcoming.

“I am sorry for the stress and inconvenience that this has added to an already stressful time of moving house … We do make mistakes, and in this case, we have fallen well short,” a spokesperson said at the time.

“The delays in responding to your complaint occurred because of human error, not a systems issue. We take our complaints obligations seriously and aim to resolve a majority of complaints within two to five business days.”

What’s going on with our banking industry?

Right now, banks are struggling to deal with a steep increase in banking scams, with up to $200 million reportedly lost to scammers in the past 12 months, and up to 1 million New Zealanders targeted.

On its website, Kiwibank says those scams can come in all forms: impersonation scams, including phishing emails and texts, fake websites and web ads, remote access and phone calls; investment scams, often involving cryptocurrency or term deposit opportunities; and romance scams through "chat rooms, social networking sites, unsolicited emails or dating websites".

Consumer has campaigned for greater action on this issue, launching a petition to ask the government to stamp out scams through a national framework to increase protection and hold businesses to account.

Meanwhile, Consumer’s Sentiment Tracker survey shows trust in our banks is improving, with 54% of respondents telling us they trust their bank, and 29% saying they don’t.

Yet a draft Commerce Commission market study report into the banking industry, released in March 2024, reported a “stable two-tier oligopoly” was enjoying sustained high levels of profitability compared with their global peers.

It said, “In a well-functioning banking market, we’d expect to see strong competition driving innovation and choice for customers, rather than the price-matching strategies we see here in New Zealand, which result in very stable market shares. The lack of a disruptive force in our banking market means competition between the majors is sporadic and not sustained.”

The Commission’s final report is due for release on August 20.

Uncertainty surrounds Kiwibank following reports that the sale of the state-owned bank is being considered by the National-led coalition government. “We need more mavericks, open banking technology, more transparent choices for customers,” finance minister Nicola Willis told the recent National Party conference in comments reported by Radio New Zealand.

“I would like to see Kiwibank grow. I would like it to become a disruptive competitor that takes on the big Australian-owned banks. It can't do that without extra capital, and I am interested in exploring where that capital might come from.”

How to complain about your bank

• Talk to your bank and lay out your concerns. If you don’t like the response you get, consider escalating your complaint to the Banking Ombudsman.

• The Banking Ombudsman is a free and independent service available to anyone who has a problem with their bank or isn’t happy with the outcome of a complaint.

• You can contact the service at www.bankomb.org.nz, 0800 805 950 or [email protected]

• For help writing your complaint, Consumer has a series of templates here.