New Zealand viewpoint

[Nattie]

http://www.stuff.co.nz/manawatustand...3445a6410.html

Bank guilty of breach of fair trading act 1987 fined 1.235million NZ$
http://www.stuff.co.nz/manawatustand...3445a6410.html

[Kafka]

Re: New Zealand viewpoint

Feedom fighters target bank fees - New Zealand's source for business, stock market & currency news on Stuff.co.nz

Having looked again at this link I feel it warrants a full posting here for ease of access. A very interesting article indeed.

Feedom fighters target bank fees
Sunday Star Times | Sunday, 16 September 2007

Should banks be allowed to charge you 90 times the true cost of a bounced payment? Rob Stock reports on a new assault on bank fees.

British regulators from the Office of Fair Trading have gone to court in an attempt to drive down bank penalty fees for bounced cheques and unauthorised overdrafts.

In Australia, there's a political campaign driving towards the same goal.

In New Zealand there are no such moves and Victorian senator Steve Fielding, from the small Family First party in Australia, thinks New Zealanders need to wake up to what he believes is secret profiteering.

Fielding is pushing for a new law in Australia which would limit Australian bank penalty fees to cost recovery and force banks to publish annual totals of the default fees they charge. The scheme would be policed by the Australian Securities and Investment Commission.

"The default fees banks are charging are outrageous and the banks know it, but there has been no pressure from the main two parties in Australia," Fielding said.
"Everyone's got a bank fees story," he said, but individuals had no power to stand up to banks, which was why politicians had to act.

"It is unfair to profit from people's genuine mistakes," he said. "You can't do without a bank, and we are saying it is OK for banks to make money, but it is outrageous that they have got default fees that are 92 times their costs."

He says he has figures to prove that the fee for dishonouring a cheque is 16 times the cost of processing the transaction and that the fee for dishonouring a direct debit is 92 times the cost of processing it.

He says in the past five years the fees for exceeding credit card limits have risen 500% in Australia.

"The banks have found that this is a soft area which no-one has been keeping an eye on," Fielding said.

Comparisons of common default fees at banks show why the Brits and Aussies are up in arms, and though Kiwi bank penalty charges are lower, cabinet minister Jim Anderton said: "That doesn't make them right or fair". The time was ripe for exploring new ways of bringing them down, he said.

British bank customers can be charged up to 39 ($110), for bouncing a cheque. The average charged by New Zealand's big six banks is $29.16, while Australia's charge up to $A50 ($59).

Even though the Office of Fair Trading intervened to force down credit card over-limit and late payment fees, Britons still pay $34.29 when they try to spend more than their credit limit allows and the bank let the payment go ahead.
Australians pay $A30 ($35) while New Zealand banks charge an average of $21.

Where New Zealand banks get as money-hungry as the worst of the Brit and Aussie banks is on penalty interest. Here, National Bank charges 28.2%, ANZ 24.75%, Kiwibank 22%, and Westpac 19.8%.

Some banks appear to play more fairly than others in some areas of penalty charging.

For example, National Bank does not charge a credit card over-limit fee. Instead, if it honours a credit card payment which takes the cardholder over their agreed limit, it simply requires that to be paid back in the next month, adding it to the minimum repayment the cardholder has to make. All the other big banks charge $20, except Westpac which charges $25.

Similarly, some banks offer a level of flexibility on some charges. Kiwibank for example, does not hit customers with hefty overdraft fees if they overdraw an account by less than $30.

Other instances of reasonableness include the policy of HSBC in the UK not to charge customers a penalty fee on the first unauthorised overdraft they incur in any six-month period, allowing for occasional mistakes by customers.

ANZ in New Zealand doesn't charge credit card late payment fees on debit balances of less than $500.

New Zealand banks could learn from some of the overseas banks, said Anderton.
"I have been interested in this area for some time. That's one of the reasons I helped set up Kiwibank. The banks say that they have to set default fees as a deterrent, but the problem is that for the people who end up paying them, the charges represent an inordinate cost."

Nowhere has Anderton seen what he would consider fair "regressive scales" where default fees for the poor are lower than for the rich.

Alan Yates of the Bankers' Association would not comment, saying fees are entirely up to individual banks.

Raewyn Nielsen, head of the Federation of Family Budgeting services, said default fees made banking unfairly expensive for the poor. "We believe that people get penalised for not having enough money in the bank," she said. "If you have got a $300,000 line of credit, you don't pay any fees, but if you are poor you can easily incur monthly charges of $25 or more."

Not only that, but the ways in which default fees are levied can be as unfair as their size.

In some cases there can be a cascade effect, says Neilsen, where one fee leads to another, and in some cases, it is bank fees themselves which put people into overdraft, incurring more fees.

For a poor family caught in such a cascade, penalty fees could quickly add up to half the weekly food bill.

She said New Zealand should adopt the cost-recovery approach proposed by Senator Fielding, though she did not believe there was any political will to take on the banks.

Anderton thinks the British approach is more realistic.

He said he was planning to look into the ongoing review of consumer protection laws here, which includes a proposal to bring in new regulations which would prohibit businesses from including unfair terms in contracts.

Britain has regulations on unfair contract terms, and it is those the Office of Fair Trading is using to go after the banks, emboldened by its success in using them to drive down unfairly high credit card default charges.

Consumer laws here largely focus on disclosure, and do not generally set limits on fees and charges.

Deputy banking ombudsman Susan Taylor said there was nothing to stop banks from profiting from default charges, and it appeared that sometimes the banks do little to help people break cycles of incurring default charges.