Piper Overpaid: Time For Swan To Call Banks' Tune

The Sunday Age

Sunday January 20, 2008

James Kirby

THEY must be laughing all the way to the...well, to the other bank. The news that banks will be charging us $2 to use "foreign" bank ATMs is surely the last straw. It's extortion dressed up as fee revenue and something tells me this time they won't be getting away with it.

Our newly elected Treasurer, Wayne Swan, knows a good punch bag when he sees one and he's started early with a wild swing at how the banks are charging "exit fees" to customers who want to switch their mortgages.

If Swan looks a little closer, he'll discover a virtual motherlode of political opportunity. Moreover, he could reform a sector that nobody has looked at seriously for more than a decade.

The previous major inquiry left the banks happily weaving between three regulators -and not one of them charged specifically with monitoring bank fees. The new ATM fee stinks because it's profiteering - you can be charged $2 for taking out $20.

It's a hidden fee - that is, the fees are not made clear to you at the ATM, and it just might be illegal (more on this later).

What's more, if you think it's bad enough when you are doing everything right by the bank, woe is the customer who actually breaches the rules even if they don't realise they're doing so. If you overdraw your bank account - through a direct debit, for example - you can be hit for up to $40 at most banks.

Thankfully, customers are not taking it lying down. In the past six months, the major banks have received 30,000 letters of complaint on bank fees. If you really want to dig into this issue you can visit a website - fairfees.com.au - backed by the Australian Consumers Association.

Gerard Brody, policy director at the Consumer Action Law Centre, says his group has been lobbying the Reserve Bank of Australia to reform bank fees. As he suggests, only the RBA can get the fee information from the banks because the banks constantly claim confidentiality.

In fact, the funniest (or was it just absurd) press release I've come across this year came from the Australian Bankers Association defending their right to withhold information from any bank fee inquiry.

The ABA said if they released the fee information they could be accused of price-fixing! What can you say? Thanks, chaps, for giving the consumer movement a new way to beat you up!

Indiscriminate charging of bank fees is inexcusable. In Britain, the Office of Fair Trading won a huge legal victory last year against credit card fees. This year the British regulator is going after the big fish - high-street bank transaction charges.

A case has just begun in the High Court in London where the regulator is claiming that the level of fees British banks are changing is unlawful. The kernel of the claim is that banks are using fees to raise revenue rather than charging fees that reflect the true cost of the banking activity. The case is being watched everywhere in the world.

In Australia, it's being watched by David Cousins, the executive director of Consumer Affairs (Victoria). He's the guy who chaired the previous major bank fees inquiry, the Prices Surveillance Inquiry, in 1995. Says Cousins: "There's a revival of concern here; the new fees are hitting the poorest people. They need to be monitored."

New bank fees have sparked fresh protests from consumers. Wayne Swan is looking at fees.

In Britain, banks are facing legal challenges over high fees.

It's been more than a decade since a bank inquiry.