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Australian Bankers' Association comments
on bank account switching package
Sydney, 15 August, 2008: The Australian Bankers’ Association (ABA) said that the banking sector is on track to deliver the transaction account switching package which starts in November.
In the meantime, most banks have alternate processing systems in place to assist customers in the transition phase.
Responding to media reports today, the ABA said the reported lack of applicants to switch transaction accounts does not mean that the switching package is failing. (See details of switching package below)
David Bell, Chief Executive of the ABA said: “The criticisms have come from consumer advocacy group Choice which may be frustrated that customer satisfaction levels for banks are not as low as they would wish.”
There seems to be few difficulties for home loans borrowers wishing to a switch to another housing loan financier.
The ABA investigated this issue a few years ago and concluded that there were no significant switching problems with home loan providers and, indeed, the rate of home loan refinancing – particularly since the emergence of mortgage broking - is strong.
Australian Bureau of Statistics data shows that around 30 per cent of home loans (owner-occupied) are refinanced over the past year, indicating that there are not substantive refinancing difficulties. Over the 12 months to the end of June 2008, 227,000 housing loans were refinanced.
The Australian Securities and Investments Commission’s (ASIC) review of mortgage entry and exit fees released in April this year showed that non-Authorised Deposit-taking Institutions (non-ADIs) typically charge higher fees than banks and it was the non-banks that pioneered the use of deferred fees.
Mr Bell added: “A major component of exit fees are the deferred establishment fees. If you have a loan with a bank these are often waived if you exit the loans after three or four years. The effect of deferring these up-front fees, for example, legal and paperwork costs, is that it reduces the costs to the customers of setting up a new loan.”
Finally, while the switching package has not yet started, the ABA is giving thought on how to promote the package when it starts in November.
Notes for editors:
Switching package
The following key principles have been agreed by banks:
- The old financial institution will provide a list* of the customer’s direct debit and credit arrangements over the past 13 months to the customer in order to facilitate the establishment of the arrangements for the new account;
- The new financial institution will provide the customer with information and support to help the customer make the switch. If requested by the consumer, the new financial institution will assist in notifying the Direct Entry users of the new direct debit and direct credit arrangements and assist with closing the customer’s old bank account;
- The service will be supported by obligations in industry codes of practice. This will include obligations in regards to timeliness and to provide information to customers on how to avoid exception fees, and to deal fairly with customers throughout the account switching process;
- Industry has agreed that the service will be implemented by November 2008. A progress report on the implementation of the switching service will be provided to the Government on a quarterly basis.
Some banks already have interim measure in place before the November implementation deadline.
* At least initially, banks are likely to take different approaches to producing a ‘list’. All approaches must, however, provide the customer with the direct debit and credit details needed to help the customer switch accounts. If specifically requested by the customer, this list must be provided on one page.
For further information:
Heather Wellard
Director, Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439
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