Westpac admitted it breached the Credit Contracts and Consumer Finance Act, Commerce Commission says.

Westpac will pay $3.7 million to customers to whom it failed to provide key information about credit cards, the Commerce Commission says.

The commission said Westpac signed a settlement agreement admitting it breached the law by failing to provide key information to credit card customers before they entered into contracts.

Due to a process error, when Westpac posted credit cards to 19,000 new credit card customers between May 2017 and March 2018, it failed to provide the required initial disclosure of their credit terms, the commission said.

By law lenders must provide important information that helped customers understand their rights and obligations under their loan before they entered into a loan contract, the commission said.

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Neither the commission nor Westpac stipulated the amount each customer would receive, but the average across all customers would be nearly $200 each.

Westpac originally reported the issue to the commission in March 2018.

The commission then filed High Court proceedings against the bank in July, seeking a declaration that the bank breached the law as well as orders for statutory damages and refunds of costs of borrowing.

Westpac had agreed to admit in court that it breached its legal obligations and would pay at least $3.6m to customers to whom it failed to provide the required initial disclosure information, the commission said.

The bank had already written off $100,000 owed by some affected customers, the commission said.

The matter was still before the court.

A Westpac spokesman said it was compensating 19,365 new credit card customers who were sent a card without a welcome letter containing disclosure information.

Westpac general manager of consumer banking and wealth Gina Dellabarca said an error during an upgrade to Westpac's IT systems resulted in the letter not being sent to affected customers.

"Westpac proactively identified the error and reported it to the Commerce Commission."

Westpac was contacting affected customers to inform them of the compensation payment, she said.