Marcin Jaskulski, Sydney
A decade ago you could venture into a bank, passbook in hand, and withdraw money knowing that you alone would be reducing the balance of your account. Now the bank reduces your account balance with its array of fees.
In 1997, households paid out $1.16 billion in bank fees. By 2004, this had risen to $3.44 billion. The most substantial increase was in credit-card fees, with a whopping 579% increase in bank revenue from those fees over the same eight-year period.
During the 1980s, the Reserve Bank helped deregulate the banking sector, ostensibly to promote choice and competition. Now the industry is blaming competition for the increase in transaction charges when it should be reducing them.
As a number of banks announce record profits — such as St. George Bank's $502 million half yearly profit, an increase of 11.8% on (last year), and the ANZ's $1.81 billion profit, up 16% from (2005) — interest rates are also rising and the media has started asking what the impact would be on the mortgage belt.
The gradual increase in bank fees, which also constitutes bank revenue, is a non-issue for the corporate media. Yet, these charges can, and do, eat into ordinary people's disposable income and impact most significantly on the poor.
For instance, Robert, a 47-year-old single father who lives with his teenage daughter in a housing commission house in outer Sydney, checks his bank statements online once a month and does not notice many mistakes. He told me that he thought rising fees were necessary "to fund the costs of running a financial institution".
On the other hand, Beba, 33, who is unemployed and lives with her mother in a flat in outer Sydney says fees are "astronomical" and bank managers are "greedy". She checks her bank statements and sometimes notices mistakes. "If it's a huge mistake, I fix it on the spot. If it's small, I don't bother."
What do the major industry players think of the status quo?
The banking ombudsman's office (BO), who is supported by banks and other financial institutions, deals with complaints about the industry. The rate of complaints in 2004 increased by 4.2% to 6104. But the BO's Carol Steward told me that the level of fees are consistently similar. The BO explains to those who complain that fees are part of the terms and conditions of the contract.
In March 2001, 10 members of the Australian Banking Association (ABA), which represents the banking industry, signed up for minimum standards for their basic bank accounts for federal government health concession cardholders. This includes features such as no account-keeping fees.
David Bell, chief executive of the ABA, said in his latest statement(sent to me by ABA) that the industry is socially responsible.
"Recognising that some members of the community are genuinely needy, banks have developed basic bank accounts that carry nil or minimal fees for customers who qualify", he claimed.
Heather Wellard, the ABA's director of public relations, explained to me on May 8 that the organisation is working to ensure customers make informed choices when purchasing banking products. "We sent 'How to' booklets to state and federal politicians so that they can make their constituents aware of our basic bank accounts", she said.
In monetary terms, substantial fees are overdrawn account fees, dishonour fees and late payment fees. These can chew up upwards of 20% of a welfare recipients' weekly income.
Wellard says that customers can avoid these fees by checking their bank balances. However, she did not mention reducing the fees. The ABA states that service fees were introduced to remain "competitive" as new mortgage providers entered the market.
These views are not shared by the Australian Consumer Association (ACA), an independent organisation looking after customer rights. Recently, it claimed that banks enforce "potentially illegal fees" and that consumers do not know some fees exist.
The ABA disputed both these claims.
ACA senior finance policy officer Nick Coates told me on May 10 that there is "an upward creep of retail banking fees and a creative development in the innovation of hidden fees". He says that banks should show a greater understanding of the challenges facing low-income people.
"Penalties such as overdrawn and late fees can cost between $35-$60", Coates said, adding that such fees are harsh and unfair.
There is, however, one thing these industry organisations agree on. If customers are not happy with the deal, they should vote with their feet and look for something better. But why should they have to?
From Green Left Weekly, May 31, 2006.
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