The local arm of Australian lender Westpac has agreed to refund around 93,000 customers in New Zealand who were overcharged for some banking services.

The lender has entered into an agreement with the Financial Markets Authority (FMA) and Commerce Commission to repay a combined amount of NZ$7m ($4.58m) for the misconduct.

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In December 2017, Westpac self-disclosed the issue to the regulators that it did not correctly discount fees on multiple banking packages. The error affected 61,000 customers.

Later in December 2018, the lender further informed the regulators of similar issues affecting another 32,000 customers.

Following the detection, Westpac announced to compensate all fees incorrectly charged. It also said that it will improve its systems to prevent such occurrences in the future.

In a statement, the Commerce Commission said that the bank already reached and refunded a significant number of impacted customers.

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FMA director of Regulation Liam Mason said: “The Enforceable Undertaking illustrates that regulatory requirements are working as Westpac recognised its possible breaches and approached us and the Commerce Commission.

“This is the kind of proactive behaviour we expect to see from market participants.”

Commerce Commission chair Anna Rawlings said: “The Commission also encourages the identification and self-reporting of conduct like this and appropriate remediation for affected customers.

“We emphasise the importance of robust systems and sound monitoring practices to help avoid errors, and to quickly identify and fix them if they occur.”

Last month, Westpac launched generic product data to support open banking in Australia. The move will help to evaluate the performance and reliability of the open banking system.