The Commerce Commission has filed High Court proceedings against Westpac.
The Commission said on Thursday that the bank had breached the Credit Contracts and Consumer Finance Act 2003 by "failing to provide key information that it was required to give customers under the law".
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In March 2018, Westpac reported to the Commission that it failed to provide key initial disclosure information to more than 19,000 personal credit card customers when they first took out their credit card between May 2017 and March 2018.
"The Commission alleges that due to a process error, when Westpac posted new credit cards to some customers, they did not also receive disclosure of the terms of credit," said the Commission in a statement.
Westpac told Newshub that the lack of disclosure was the result of an error that occurred during an upgrade to IT systems.
"Corrective disclosure was provided to these customers and we proactively notified the Commerce Commission. We also refunded fees and interest charges to customers who were in default, and have made changes to make sure this issue is not repeated," the bank told Newshub.
The Commission wants a declaration that Westpac breached its initial disclosure under the Act and is seeking an order for the return of costs of borrowing to affected borrowers and order for payment of statutory damages to affected borrowers.
"This case is important for clarifying the scope of lender liability to borrowers, in a situation where thousands of customers were not provided with initial disclosure required under the law," said Commission chair Anna Rawlings.
Newshub.
