A whopping $28 million will go back into the pockets of low-earning Aussies after a bombshell report exposed how banks were overcharging millions doing it tough.
Shadow Immigration and Citizenship Minister Dan Tehan says the Albanese government “should have been” focusing on inflation from the moment it came to office.
“It’s been in office for over two years now and it hasn’t been driving down inflation like it should have been,” Mr Tehan told Sky News Australia.
“They haven’t been working with the Reserve Bank to drive down interest rates, they haven’t been working with the Reserve Bank to make sure that they can drive down inflation.
“This is a mess of their own making.”
In its report titled Better Banking for Indigenous Consumers, the commission found ANZ, Commonwealth Bank, Westpac, Bendigo and Adelaide Bank kept at least two million Aussies on low-incomes in high fee accounts, even as many relied on Centrelink payments.
Of the $28m to be refunded, $24.6 million will go back to customers receiving ABSTUDY payments, which services Aboriginal and Torres Strait Islander students and apprentices, and others in areas with higher Indigenous populations.
Many were kept in these high-fee accounts as the banks had ‘opt-in’ processes which required customers to take active steps to use the appropriate low-fee alternatives, according to the report.
ANZ was one of the banks exposed for keeping low-income earners in high fee accounts. Picture: NCA Newswire / Gaye Gerard
ASIC Commissioner Alan Kirkland argued the banks caused avoidable financial stress on these customers through processes which hindered those predominantly in regional and remote areas.
“Banks knew that many of these customers on low-incomes were in inappropriate high-fee accounts, and it has taken ASIC’s intervention to force them to act,” he said.
“Before our review, most banks only provided their customers with difficult ‘opt-in’ processes for switching to low-fee banking options, including forcing some consumers to travel hundreds of kilometres to their nearest bank branch.”
Since sharing key findings of its review with the banks in July 2023, they have transferred more than 200,000 eligible customers into low-fee accounts for an estimated $10.7m in future annual savings.
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Mr Kirkland welcomed the estimated $28m to go back into the pockets of Aussies over the coming 12 to 18 months but called for more to ensure this issue did not happen again in future.
“This is the second report from ASIC in the last two months that highlights where banks have failed to put customers’ needs at the heart of their operations,” he said.
“It highlights the impact the banking system can have on Australians. Fair banking services for all Australians, including those on low-incomes or located in regional or remote areas, are critical for our financial system.”
Many customers were crippled by dishonour fees, overdraw fees and account keeping fees which eroded their limited funds.
Mr Kirkland called on the banks to do more in servicing their customers down the track. Picture: Jane Dempster/The Australian.
In one case study, ASIC outlined an ABSTUDY recipient Mali who was refunded 12 months’ worth of overdraw fees – more than $3,382 – due to the project.
Caroline, a single mother on a carer’s payment in Hervey Bay, Queensland, was refunded $4,220 of overdraw fees after being automatically switched by her bank to a low-fee account, while another ABSTUDY recipient will get $3,625 back in dishonour fees due to the project.
Mr Kirkland called for banks to facilitate a simple transition for low-income customers to more appropriate bank types.
“Banks need to ensure they have systems and processes in place so customers on low incomes can easily transition to low-fee accounts, regardless of their location,” he said.
“We expect all banks – not just those we reviewed for this report – to consider these findings, improve the accessibility and distribution of low-fee accounts and commit adequate resourcing to specialist First Nations services.”