Sydney, 17 September, 2008: The Australian Bankers’ Association (ABA) has welcomed a Senate Committee majority report which recognises that the approach banks have taken on exception fees which has benefited consumers and has provided evidence of competition in the marketplace.
The report from the Senate’s Standing Committee on Economics Inquiry into the Australian Securities and Investments Commission (Fair Bank and Credit Card Fees) Amendment Bill 2008 proposed by Family First was tabled yesterday afternoon in Parliament.
The majority report notes there has been some movement toward fewer and lower default charges and is unable to support a Family First Bill which proposed price caps on these fees. The report noted:
“….Some new products have been developed; most institutions have ceased to impose one of the most egregious default charges (the inwards cheque dishonour fee); and charges overall have been reduced.
3.9 The above changes suggest that at least some financial institutions may consider that they will be able to achieve a competitive advantage by reducing default charges or by introducing products that enable customers to avoid or minimise the charges.”
The ABA agrees that the proposed Bill would cut across and potentially pre-empt current regulatory policy developments on consumer credit, the responsibility for which is to be transferred to the Commonwealth. The report also noted that the proposed Bill would regulate only financial institutions and would not include other companies such as telecommunications firms and utilities which also charge default fees.
Tony Burke, Acting Chief Executive of the ABA, said: “It is pleasing that the Senate Committee has recognised the positive initiatives which banks have taken on exception fees. Competition may also result in further innovation.”
“It is important to note that a number of banks have been active on providing accounts which don’t charge exception fees or provide accounts which heavily discount these fees for low income earners. Most retail banks have reduced and abolished some exception fees.”
Exception fees on consumer savings and credit card accounts include those that may be applied to dishonoured cheques, late credit card payments, overdrawn accounts and exceeded credit limits.
Exception fees are generally avoidable and there are ways you can help minimise their occurrence. Each bank has its own approach, which means genuine choice for the consumer.
The ABA has recently published a new edition of its fact sheet (www.bankers.asn.au/exceptionfees3) noting all the changes that have occurred since it announced the initiative in May 2007 when member banks undertook to provide improved information on exception fees, in response to community debate.