Bank customers on low incomes will receive over $28 million after a review found four major Australian banks systemically charged high fees to those who could least afford it.
Commonwealth Bank, ANZ, Westpac, Bendigo and Adelaide Bank kept at least 2 million Australians on low incomes—including many relying on Centrelink payments to make ends meet—in high-fee accounts.
Customers who receive government concession payments and qualify for a Commonwealth Seniors Health Card, Health Care Card or Pensioner Concession Card, are normally entitled to access low-fee accounts.
“Unfortunately, large numbers of these customers remain in high-fee transaction accounts that charge dishonour, overdraw, assisted withdrawal, and/or account keeping fees (high-fee accounts), resulting in their limited funds being eroded,” the report stated.
The report found that over 12 months, over 150,000 low-income customers eligible for low-fee accounts were charged $6 million (US$4.06 million) in fees—predominantly overdraw and dishonour fees.
Consumers From Vulnerable Areas Hit With High Fees
In a case study, the report found that low-income customers in Alice Springs were “more likely to be charged fees than low-income customers in other postcodes across the project cohort.”A total of 3,054 low-income customers in Alice Springs were collectively charged $205,280 in fees, including $115,325 in overdraw and $47,674 in dishonour fees.
This is despite Alice Springs being one of the most disadvantaged regions in Australia, with the median family income only 37 percent of the national median income.
The area also has a significant Indigenous Australian population with a low socio-economic background and a lack of banking access.
Other examples include an ANZ low-income customer being charged a total of $3,606 in dishonour fees, a Westpac customer receiving Parenting Payments being charged $3,000 in overdraw fees, and a CBA customer on the Disability Support Pension being charged $1,062 in assisted withdrawal and Bank@Post fees.
Banks Forced to Address Situation: ASIC
ASIC Commissioner Alan Kirkland said the banks had caused financial distress through avoidable fees and complicated bank processes.“Before our review, most banks only provided their customers with difficult ‘opt-in’ processes for switching to low-fee banking options, including forcing some consumers to travel hundreds of kilometres to their nearest bank branch.”
In light of ASIC’s review, the banks have migrated more than 200,000 customers to low-fee accounts, which will save an estimated $10.7 million.
Further, banks will return over $24.6 million in fees to customers over the next 12 to 18 months. This includes $24.6 million to be refunded to customers receiving ABSTUDY payments and those in areas with significant Indigenous populations.
Mr. Kirkland said the report highlighted areas where banks have “failed to put customers’ needs at the heart of their operations.”
“Fair banking services for all Australians, including those on low incomes or located in regional or remote areas, are critical for our financial system,” he said.
“Banks need to ensure they have systems and processes in place so low-income customers can easily transition to low-fee accounts, regardless of their location.”
