Opinion
Old habits are hard to kick for banks. They’re behaving badly – again
Elizabeth Knight
Business columnistHow goldfish-like corporate memories can be.
Australian banks undertook an enormous conduct spring-cleaning exercise after being pummelled and disgraced for ethical and behavioural misconduct after the financial services royal commission. Six years on and there are signs of a re-emergence of banks behaving badly.
Sure, it is not on anything like the scale of scandal uncovered during the royal commission, which resulted in a huge change of the upper governance levels in the big banks and billions of dollars in customer remediation from the big four, but it is nonetheless alarmingly sinister.
ASIC commissioner Alan Kirkland said the banks had caused financial distress through avoidable fees and complicated bank processes.
The corporate regulator – which itself has been under fire for its weak regulatory scorecard – has pinged four banks, the Commonwealth Bank, Westpac, ANZ and Bendigo and Adelaide Bank, for systemic charging of high fees.
At the very least, this looks like conduct slippage.
Making this behaviour all the more tawdry is that the victims disproportionately come from one of Australia’s most disadvantaged cohorts, Indigenous people.
The rapacious fee charging was one of the issues specifically dealt with during the royal commission, so it will be difficult for banks to claim a lack of awareness.
So here is a taste of what the corporate regulator has found.
According to the Australian Securities and Investments Commission, which released the findings of a review on Monday, one bank charged a disability support pensioner customer from regional NSW more than $2280 in dishonour fees over 12 months.
In another example, a woman on a Centrelink parenting payment was being charged $3606 in overdraw fees in 12 months, despite being eligible for a low-fee account.
In total, the banks kept at least 2 million Australians who are on low incomes, including many relying on Centrelink payments to make ends meet, in high-fee accounts.
The banks will now refund $28 million and migrate 200,000 customers to lower-fee accounts, which will cost the banks $10.7 million in yearly fees.
Spread across four banks, this loss of fee income is chump change, but the public relations fallout is way more costly.
ASIC commissioner Alan Kirkland said the banks had caused financial distress through avoidable fees and complicated bank processes, often creating barriers for regional and remote consumers.
The finding follows on the heels of another damaging report a few months ago in which ASIC found that 10 banks it studied were not sufficiently looking after hardship customers.
The banks kept at least 2 million Australians who are on low incomes, including many relying on Centrelink payments to make ends meet, in high-fee accounts.
That report said home loan lenders had made accessing financial assistance so difficult that more than one-third of Australians dropped out of the application process at least once.
This flies in the face of the constant reassurance from the banking industry that it has been going above and beyond to help people experiencing mortgage hardship in the face of higher interest rates.
In a separate development, ASIC and the CBA are now engaged in a brawl over the bank’s decisions to dump bonus caps agreed in the shadow of the Hayne royal commission. CBA’s move represents a bid to stem the flow of mortgage sales staff moving to the mortgage broking industry.
The regulator is concerned that backsliding on bonus caps could lead to pressure being applied to customers to sign up for loans and that it could increase the risk of banker misconduct. It could also result in other banks following CBA’s lead.
ASIC and the CBA are now engaged in a brawl over the bank’s decisions to dump bonus caps agreed in the shadow of the banking inquiry.Credit: Oscar Colman
Meanwhile, responding to Monday’s ASIC report, Bendigo and Adelaide Bank said it had “made progress in ensuring customer choice, improving processes, and refunding First Nations customers where appropriate but [the bank] accepts there is more work to be done as we continue to take additional steps and find new ways to improve customer outcomes”.
Westpac said it had, “taken a proactive approach to improve our support for customers in project postcodes called out … and had refunded account keeping, debit interest and overdrawn fees dating back to July 2019 for all these customers’ transaction accounts, not just the account they receive their government payment”.
CBA said it could do more for Indigenous concession customers and said it was taking action to address ASIC’s recommendations, saying further that it took the findings by ASIC very seriously.
These matters shouldn’t need to be addressed in response to ASIC. Banks need longer memories.
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