The Commerce Commission is taking Westpac bank to court, accusing it of breaches of consumer finance laws.
Photo: RNZ / Cole Eastham-Farrelly
The watchdog said the bank failed to provide key information when it issued 19,000 personal credit cards between May 2017 and March 2018.
It said consumers did not get the terms of credit when they were posted new cards because of a processing error.
It wants a declaration that Westpac breached its obligations under the consumer credit and finance law and wants the bank to pay costs of borrowing and damages to affected consumers.
Commission chair Anna Rawlings said it was an important case because it would clarify the application of the law and scope for compensation.
Lenders are required to tell borrowers such information as amounts owed, interest and payment details, resolving disputes, and cancelling loans.
Westpac said an error during an IT upgrade meant disclosure documents were not sent to more than 19,000 new credit card customers.
The error was discovered in March last year.
Westpac says corrective disclosure was provided to these customers and the bank proactively notified the Commerce Commission.
Fees and interest charges to customers who were in default were refunded and Westpac said changes had been made to make sure the issue isn't repeated.
The bank won't be commenting further while the case is before the courts.