Kiwibank is to pay nearly 50,000 customers a total of $5.2 million after admitting systems failures around its mortgages.
The Commerce Commission says the bank did not have robust home loan variation policies, procedures and systems.
It admitted it failed to "act with the care, diligence and skill of a responsible lender" and had agreed to make remediation payments to 48,000 customers.
“Under the Credit Contracts and Consumer Finance Act 2003, lenders must act carefully and responsibly in all their dealings with their customers," commission chair Anna Rawlings said.
"This includes having appropriate systems and processes in place to manage customer accounts and to support compliance with the lender’s legal obligations to its customers.
"While Kiwibank had policies in place for disclosing more complex changes, its system and process failures affected the information it provided to some customers when they made simple changes, such as re-fixing interest rates or changing repayment amounts."
The bank reported itself to the commission in August last year.