More than $28 million will be repaid after major banks overcharged low-income Australians when they should have had low-fee accounts, the regulator has said.
ANZ, Bendigo and Adelaide Bank, Commonwealth Bank and Westpac held at least two million people in accounts with high fees and hefty fines for dirty money at times when they could least afford it, the Australian Securities and Investments Commission found.
According to the Better Banking for Indigenous Consumers report released on Monday, most banks also had burdensome opt-in processes for switching to no- or low-cost options, forcing some consumers to travel hundreds of miles to the nearest branch.
Commissioner Alan Kirkland said the banks had “caused financial hardship through avoidable charges and complicated banking processes” despite being able to establish these customers were receiving government payments.
Under the Bank Code, customers who receive government assistance and are eligible for a Commonwealth Seniors Health Card, Health Care Card or Pensioner Concession Card are entitled to a basic account, a no-fee or low-fee account.
By bucking the stricter rules, banks had to move more than 200,000 people to low-cost accounts, saving those customers an estimated $10.7 million annually in the future.
“Banks knew that many of these low-income customers were holding inappropriate accounts with high fees, and ASIC stepped in to force them to take action,” Kirkland said.
One of the worst examples of cost-harm involved a low-income ANZ customer who was charged $3,606 in late fees. However, it was Commonwealth Bank that had the most accounts with the highest fees among the low-income customers in the study.
ASIC Commissioner Alan Kirkland (pictured) says banks knew low-income customers had the wrong accounts
ANZ, Bendigo and Adelaide Bank, Commonwealth Bank (pictured) and Westpac were found to have at least two million people on high-fee accounts
In the troubled Alice Springs region, which has one of the largest postcodes by area and is among the most deprived regions in Australia, low-income customers were overcharged more often than in any other region.
In total, 3,054 low-income customers from Alice Springs across the four banks surveyed were collectively charged more than $200,000 in fees, mainly for overdraft fees ($115,325) and default fees ($37,674).
A New South Wales disability pensioner was charged more than $2,280 in undue costs in one year, while a Centrelink carer was charged $1,772 in billing costs.
People on low incomes in Alice Springs were more at risk of being scammed by banks, the report found
One student using Abstudy is getting $3,625 refunded for erroneous charges he could have avoided with a low-fee account.
“We expect all banks – not just those we reviewed for this report – to consider these findings, improve the accessibility and distribution of low-cost accounts, and allocate sufficient resources for specialized services for First Nations,” Kirkland said.
Banks must also adapt their procedures so that customers are automatically transferred to a low-cost account, without having to come to a branch in person with a discount card.