Top Aussie banks slashing fees

By Vanessa Tripodi

Last year, Australians paid in excess of $1 billion in avoidable late fees, overdrawn account fees and credit card fees. However, with growing pressure from consumer groups and new government legislation, three of the big four banks have slashed, or are planning to slash, their penalty fees in 2009.

Following in the footsteps of the National Australia Bank (NAB), Westpac and St. George Bank, the Commonwealth Bank has announced fee reductions that will come into effect 1 Oct., 2009. These will include:

• A reduced $5 dishonour fee on personal and transaction accounts
• An overdraft fee reduced from $30 to $10
• A late payment fee on home and personal loans reduced from $45 to $25.

The Commonwealth will have felt pressure from two of the other big four banks to reduce its fees. However, there is also the pressure from customers and consumer groups such as Choice and the Consumer Action Law Centre (CALC). Choice and CALC have worked together since 2007 on the Fair Fees campaign, to spare Australian bank and credit card customers excessive fees.

In 2007 and 2008, the big banks began to acknowledge the pressure from this campaign, which saw Choice and CALC encourage 50,000 consumers to write to their financial institutions with their complaints. While Westpac and St. George said they didn't wipe out penalty fees entirely as they want to discourage customers from overdrawing their accounts, government legislation could see more fee reductions in the future.

Chris Bowen, minister for financial services, also believes that the threat of new government legislation may have been responsible for the banks' recent amendments. The legislation will allow customers to challenge the amount of their penalty fees, and whether the fees have been applied unfairly. This will require that the financial institutions reveal the exact costs involved, to justify their charges. While the legislation is still in draft form, it is expected to regulate the prices of the banks' products and services. Yet it is the previously exorbitant fees that have made the big four banks some of the most profitable in the world.

Choice and CALC are also seeking transparent fee structures for penalty fees. "At present, these fees cannot be justified," Choice spokesman Christopher Zinn has said in published accounts. "Penalty fees should only allow banks to recoup any losses....We know in the case of credit cards there aren't any because the banks continue to accrue interest on any outstanding debt."

In July 2009, changes to the NAB fee structure saw it remove all fees for customers who overdraw their personal and savings accounts, or incur dishonours on their transaction accounts. However, NAB customers still face a $30 late payment fee and a $25 over limit fee on their credit cards. Westpac and St. George have reduced all penalty fees for all transaction and credit card accounts to $9. ANZ have yet to make a move on their penalty fees.

In the eyes of their customers and consumer groups, the big four banks in Australia have quite a way to go in reducing their penalty fees, and justifying their additional charges to credit card customers. However, with more industry pressure and new government legislation, Australian banking customers should expect more positive changes to come.

Article by Vanessa Tripodi

Published: August 17, 2009