The Australian banks include Commonwealth Bank, Westpac, Bendigo and Adelaide Bank and ANZ.
Four banks in Australia are set to refund a combined total of $28 million AUD ($18.95 million USD) to their customers with low income which also includes customers from First Nation. A review by the corporate regulator discovered that the banks have been keeping its customers who were eligible for cheaper products in bank accounts that are high fee.
The banks include Commonwealth Bank, Westpac, Bendigo and Adelaide Bank and ANZ who systematically charged high fees to those customers who could least afford it. The Australian Securities and Investments Commission found that about two million people were kept in the high-fee accounts. The two million people on low incomes also included many relying on Centrelink payments to make their dues and make ends meet. This brought steep dishonour and high overdrawn charges to them when they could barely afford it.
The banks knew that a large number of their low-income clients had accounts with inappropriately high fees. “Banks knew that many of these customers on low-incomes were in inappropriate high-fee accounts, and it has taken ASIC’s intervention to force them to act,” Commissioner Kirkland said.
As per a report released by the Better Banking for Indigenous consumers most banks also faced difficulties in the “opt-in” processes to make the switch between no or low-fee options. They even made some of their customers travel miles for procedures to their nearest branches.
The customers receiving certain payments made by the government are entitled to function under low-fee accounts as stated under the banking code of practice. However according to the Australian Securities & Investments Commission most customers with low-income continue to stay in high-fee accounts dissolving their savings.
As stated under the banking code, the customers who receive government concession payments and qualify for a Commonwealth Seniors Health Card, Health Care Card, or Pensioner Concession Card are entitled to basic, no, or low-fee accounts
Alan Kirkland, the commissioner of ASIC (Australian Securities & Investments Commission) said the banks had created financial distress through their complicated processes and avoidable fees. This more so made the management of money difficult for remote and regional customers.
Review by ASIC was prominently focused on improving financial results of the First Nation’s consumers by addressing the avoidable fees. These findings led to broader outcomes for low-income people nationwide.
Banks had their own processes and ways of identifying low-income customers who are eligible for the low-fee account. Although their efforts to succeed and market the eligibility failed to persuade clients to switch to the less expensive options. Success rates went down as low as 0.5%.
Keeping ASIC’s review in mind, it stated that these Australian banks intended to move over 200,000 customers into low-fee accounts. This gives the customers around $10.7 million in annual savings for the future.
One of the worst cases of fee harm was a customer that had a low-income account at ANZ was charged $3606 in dishonour fees. Although the Commonwealth Bank had the most number of people with low-income holding high-fee accounts as per the study.
Following an ASIC assessment, banks will reimburse these consumers for over $28 million in fees over the course of the next 12 to 18 months. Of this amount, $24.6 million will be returned to customers who receive ABSTUDY payments and those who live in locations with a substantial First Nations population.
In a similar case, one student on Abstudy will be refunded $3625 for dishonour fees that could have been avoided on a low-fee account.
However, Kirkland said more needed to be done to prevent a recurrence. “Banks need to ensure they have systems and processes in place, so customers on low incomes can easily transition to low-fee accounts, regardless of their location.”