The Financial Markets Authority has filed charges in the High Court against ANZ Bank over credit card repayment insurance.
The FMA claims ANZ made false and misleading claims.
The authority said the bank issued duplicate policies to some customers which provided no additional benefits and failed to cancel policies for ineligible customers, while continuing to charge them.
It said the bank contravened the Financial Markets Conduct Act and it is seeking penalties and costs against the bank.
ANZ first notified the regulator about both issues in June 2019, but the FMA said the bank had first identified the problems in 2017 and 2018.
The FMA said the bank did not disclose the problems to it or the Reserve Bank during their joint conduct and culture review of New Zealand's retail banks in mid-2018.
The charges relate to just more than 300 customers, with policies between April 2014 and September 2019.
The FMA said the case pointed to a failure of internal systems and controls.
ANZ acknowledged it took too long to report the issues to the FMA.
ANZ managing director of retail and business banking Ben Kelleher said the bank was very sorry for what had happened.
''We actively review our processes and systems to try and identify issues that could impact our customers. Where we find problems, we work to fix them for our customers.''
ANZ said it had since contacted all affected customers to apologise and compensate them for the issues, which were unintentional and caused by human error and systems issues.