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News has been released today that one of the three biggest banking groups in Australia is wiping 'penalty fees' from its personal account charging structure.
They are proclaiming to be doing it 'for the best interests of their customers', but are they ? or have they been backed into a corner by the australian government and consumer groups ?
The Australian Securities and Investments Commission been investigating penalty charges since 2006, putting a bill before senate in June 2007.
In September 2007 NAB reduced penalty fees from $50 to $30 following the Senate agreeing to an inquiry legislation, introduced by Senator Steven Fielding, to stop banks charging customers exorbitant penalty fees. NAB also announced that in early 2008 they would offer new accounts with no penalty fees at all and remove penalty fees on credit card accounts for concession card holders. they introduced a monthly fee paying account at $6 called Clear banking which charged no fees if your account became overdrawn, or if the account had insufficient funds to pay a direct debit or periodical payment
In October 2007 Federal Treasurer Peter Costello has requested banks to review their penalty fees. Mr Costello said "The fees they were charging bore no relation to the actual cost to the bank".
In July 2008, in response to the UK test case and the UK's Office of fair tradings personal current account market study, GE Money entered a submission to the governments Green Paper on financial services and credit reform, calling for a similar test case on penalty fees and asking for greater guidance from ASIC on what consitutes a fair fee.
In Setember 2008 the Senate Economics Committee released its report on its inquiry into the Australian Securities and Investments Commissions (Fair Bank and Credit Card Fees). Although the Committee addressed some of the problems with unfair penalty fees, consumer groups were disappointed that the senators failed to recommend new laws to protect consumers from unfair bank penalty fees.
The problems with unfair penalty fees, which were stated in the report include:
In February 2009 the Government announced the fast tracking of the implementation of new national unfair contract laws (similar to the UK's UTCCR 1999 which are being used to challenge unauthorised overdraft fees here) This comes into force on 1st January 2010 (bought forward from a proposed implementation of 2011)- giving Australian consumers the right to challenge unfair contract terms and conditions in standard form contracts - including penalty fees.
Consumer Affairs minister Chris Bowen says regulators will make the case of whether fees or charges are unfair in a relevant tribunal. Mr Bowen says the 2010 date has been set to allow the laws to pass through Parliament and to give suppliers a chance to remove unfair contracts terms themselves. "The law as it is at the moment doesn't provide protection for unfair contract terms," he said.
"We'd be seeking business to look at the spirit of what we're trying to do and get their houses in order before the first of January where possible."
So NAB maybe leading in the abolishment of unauthorised overdraft fees, but I don't think its for entirely altruistic reasons...more getting their house in order before consumers and regulators have the power to challenge them and go through lengthy court battles as have been seen in the UK.
Sources: Choice consumer group / AbC news / Australian Securities and Investments Commission
They are proclaiming to be doing it 'for the best interests of their customers', but are they ? or have they been backed into a corner by the australian government and consumer groups ?
The Australian Securities and Investments Commission been investigating penalty charges since 2006, putting a bill before senate in June 2007.
In September 2007 NAB reduced penalty fees from $50 to $30 following the Senate agreeing to an inquiry legislation, introduced by Senator Steven Fielding, to stop banks charging customers exorbitant penalty fees. NAB also announced that in early 2008 they would offer new accounts with no penalty fees at all and remove penalty fees on credit card accounts for concession card holders. they introduced a monthly fee paying account at $6 called Clear banking which charged no fees if your account became overdrawn, or if the account had insufficient funds to pay a direct debit or periodical payment
In October 2007 Federal Treasurer Peter Costello has requested banks to review their penalty fees. Mr Costello said "The fees they were charging bore no relation to the actual cost to the bank".
In July 2008, in response to the UK test case and the UK's Office of fair tradings personal current account market study, GE Money entered a submission to the governments Green Paper on financial services and credit reform, calling for a similar test case on penalty fees and asking for greater guidance from ASIC on what consitutes a fair fee.
In Setember 2008 the Senate Economics Committee released its report on its inquiry into the Australian Securities and Investments Commissions (Fair Bank and Credit Card Fees). Although the Committee addressed some of the problems with unfair penalty fees, consumer groups were disappointed that the senators failed to recommend new laws to protect consumers from unfair bank penalty fees.
The problems with unfair penalty fees, which were stated in the report include:
- Customers cannot always avoid penalty fees.
- Some penalty fees are almost certainly much greater that the costs incurred by the financial institution.
- Customers do not have ready access to any dispute resolution process regarding unfair fees.
In February 2009 the Government announced the fast tracking of the implementation of new national unfair contract laws (similar to the UK's UTCCR 1999 which are being used to challenge unauthorised overdraft fees here) This comes into force on 1st January 2010 (bought forward from a proposed implementation of 2011)- giving Australian consumers the right to challenge unfair contract terms and conditions in standard form contracts - including penalty fees.
Consumer Affairs minister Chris Bowen says regulators will make the case of whether fees or charges are unfair in a relevant tribunal. Mr Bowen says the 2010 date has been set to allow the laws to pass through Parliament and to give suppliers a chance to remove unfair contracts terms themselves. "The law as it is at the moment doesn't provide protection for unfair contract terms," he said.
"We'd be seeking business to look at the spirit of what we're trying to do and get their houses in order before the first of January where possible."
So NAB maybe leading in the abolishment of unauthorised overdraft fees, but I don't think its for entirely altruistic reasons...more getting their house in order before consumers and regulators have the power to challenge them and go through lengthy court battles as have been seen in the UK.
Sources: Choice consumer group / AbC news / Australian Securities and Investments Commission
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