The Treasury has published draft legislation revealing plans to force banks to scrap a range of fees and charges, including credit card overdue payment fees and home loan exit fees. The banking industry says the reforms are being pushed through too fast and the consultation period has not been long enough.
The draft document also proposes to prevent banks from offering increased credit card limits to new customers, and a range of other changes to increase transparency and make it easier for the public to compare products offered by different institutions.
Looking to influence Government legislators, public advocacy group Choice recently released a report called “Better Banking” that includes suggestions such as portable bank account numbers, changes to ATM fees, making it easier to switch mortgages, public disclosure of complaints statistics, and abolishing some other bank fees, all aimed at increasing competition in the banking sector. Research by Choice also found that credit unions, building societies and smaller banks are currently offering the most consumer-friendly banking solutions.
Most Australians are not taking advantage of these services however – around 80 percent of bank deposits and lending to households is with one of the “big four” banks, ANZ, Commonwealth, Westpac/St. George and National Australia Bank (NAB).
Choice spokesperson, Mr Christopher Zinn said, “Banks have taken advantage of consumer inertia, which is largely due to the complexity of products, exit fees and bundling, as well as the widespread view that one bank is as bad as the other. However, NAB has publicly broken ranks now, and there’s more of a price war going on so more people are actually changing banks.”
Greater Building Society spokesperson Mr Craig Eardley said, “The broadening of the use of comparison rates is very welcome and they should be better promoted to ensure consumers know the true cost of their loan or the true benefit of their investment after fees and charges”.
He confirmed that people are looking for more responsive banking noting that “Greater’s net loan approvals for January were up 100 percent on January 2010” and that “last month saw a new record week of home loan enquiries”.
Despite criticism by the banks about the reforms, which will cost the big banks hundreds of millions of dollars in lost fees, the draft legislation is expected to go before Parliament within two weeks and may come into effect as soon as July this year.
Mr Zinn said, “We’re keen to see exit fees cut, account portability and changes to credit card fees which are long overdue. We want the Government to stick to its guns and make sure these reforms go through.”
If the reforms do go through, it’ll be the beginning of a much wider experience of “happy banking”.
