More than $28 million will be refunded after major banks were found to have overcharged low-income Australians who should have had accounts with low fees, the market watchdog says.
The Australian Securities and Investments Commission found that ANZ, Bendigo and Adelaide Bank, Commonwealth Bank and Westpac were holding at least two million people in accounts with high fees and hefty dishonour and overdraft charges when they could least afford to do so.
According to the Better Banking for Indigenous Consumers report released Monday, most banks also had difficult “opt-in” processes for switching to no-fee or low-fee options, including requiring some consumers to travel hundreds of miles to the nearest branch.
Commissioner Alan Kirkland said the banks had “caused financial hardship through avoidable fees and complicated banking processes” despite being able to identify these customers as recipients of government payments.
Under the banking code, customers who receive government concession payments and qualify for a Commonwealth Seniors Health Card, Medical Care Card or Pensioner Concession Card are entitled to basic, no-fee or low-fee accounts.
The crackdown on fees has forced banks to commit to moving more than 200,000 people to low-fee accounts, saving those customers an estimated $10.7 million in future annual savings.
“Banks knew that many of these low-income customers had inappropriate accounts with high fees, and it took ASIC’s intervention to force them to act,” Kirkland said.
ASIC Commissioner Alan Kirkland (pictured) says banks knew low-income customers had the wrong accounts
ANZ, Bendigo and Adelaide Bank, Commonwealth Bank (pictured) and Westpac were found to be holding at least two million people in high-fee accounts.
One of the worst examples of fee harm was a low-income ANZ customer who was charged $3606 in dishonour charges, but it was Commonwealth Bank that had the highest fee-bearing accounts held by low-income customers in the study.
In the troubled Alice Springs area, which has one of the largest postcodes by area and is one of the most deprived in Australia, low-income customers were more likely to pay excessive fares than in any other region.
A total of 3,054 low-income Alice Springs customers of the four banks were collectively charged more than $200,000 in fees, mainly for overdraft ($115,325) and dishonour ($37,674).
A disability support pensioner in regional New South Wales was charged more than $2280 in dishonour charges in one year, while a person receiving a Centrelink carer’s payment was charged $1772 in account maintenance fees.
Low-income earners in Alice Springs were more likely to be scammed by banks, report says
An Abstudy student will be refunded $3,625 for dishonorable charges that could have been avoided with a low-fee account.
“We hope that all banks – not just those we analyzed for this report – will consider these findings, improve the accessibility and distribution of low-fee accounts, and allocate adequate resources to specialized services for First Nations,” Kirkland said.
Banks must also change their processes to automatically switch customers to a low-fee account without requiring them to go to a branch in person with proof of a concession card.