Add Category
Four Australian banks will refund a combined $28 million to people on low incomes, including First Nations customers, after a review by the corporate regulator found the customers had been kept in high-fee bank accounts despite being eligible for cheaper products.
The report, released by the Australian Securities and Investments Commission (ASIC) today, found ANZ Bank, Bendigo and Adelaide Bank, Commonwealth Bank and Westpac had kept at least two million customers, including many receiving Centrelink payments, in high-fee accounts.
ASIC said the banks had caused financial distress through avoidable fees and complicated processes.Credit: Louie Douvis
Under the banking code of practice, customers receiving certain government payments are entitled to operate low-fee accounts. However, ASIC said many low-income customers remain in high-fee accounts, eroding their savings.
ASIC commissioner Alan Kirkland said the banks had caused financial distress through avoidable fees and complicated processes that often made managing money difficult for regional and remote customers.
“Banks knew that many of these customers on low incomes were in inappropriate high-fee accounts,” he said, noting that before the review, most banks only provided their customers with difficult “opt-in” processes for switching to low-fee options. Some customers had to travel hundreds of kilometres to the nearest branch.
Banks had processes in place to identify low-income customers likely to be eligible for a low-fee account, but their processes for promoting that eligibility were ineffective in getting customers to migrate to the low-fee alternatives. Success rates were as low as 0.5 per cent.
Following ASIC’s review, the banks committed to moving more than 200,000 customers into low-fee accounts, giving the customers an estimated $10.7 million in future yearly savings.
The banks will refund more than $28 million in fees to these customers over the next 12 to 18 months, of which $24.6 million will be returned to those receiving ABSTUDY payments – a group of payments for Aboriginal or Torres Strait Islander students or apprentices – and those in areas with significant First Nations populations.
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.”