Save Search

Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Thursday, 14 November 2002
Page: 9056


Mr SNOWDON (12:29 PM) —I welcome the opportunity to speak in the debate on the Financial Sector Legislation Amendment Bill (No. 2) 2002. I am particularly pleased to highlight that item 8 of the bill gives APRA the power to direct a subsidiary of an authorised deposit-taking institution or a non-operating holding company to undertake certain activities to ensure that the subsidiary complies with the prudential standards or behaves in a way that is in the interests of depositors. I think that is very important. I want to now refer to some situations in the seat of Lingiari, particularly in relation to Indigenous Australians. Indigenous people, like other Australians, have had to come to terms with substantial structural changes that have occurred in our financial system. While we welcome new technology and regulations that have positive impacts on consumers, there are a number of negative impacts, particularly for the illiterate, for low-income earners and for people located in rural and remote communities. Indigenous people make up a significant proportion of these groups.

I draw the attention of the House to work done in this area by the Centre for Aboriginal Economic Policy Research at the Australian National University and, in particular, a paper prepared by researchers Siobhan McDonnell and Neil Westbury. Neil Westbury is a former general manager of Reconciliation Australia. The paper they co-authored was titled `Giving credit where it is due: Delivery of financial services to Indigenous people in regional and remote Australia'. It was published last year and it details the need to protect the interests of low-income earners and, in particular, Indigenous people. The paper argues that deregulation has had a profound impact on Indigenous Australians. APRA would do well to consider this document and what is in the best interests of Indigenous depositors. Without the ability to save, individuals are denied a range of economic opportunities, in particular the opportunity to break out of the poverty trap. Work by Neil Westbury in the Barwon-Darling region details the specific problems faced by Indigenous Australians. These problems are relevant to Indigenous communities across Australia. Westbury considers the problems to be:

• the failure of financial providers to take account of the different conceptions that Indigenous people have of financial facilities;

• the problems caused by the inadequate provision of banking and financial services within the region;

• the fact that many Indigenous people do not understand either the way bank fees and charges operate, or how to minimise these fees and charges; and

• the low technical proficiency of many Indigenous people.

In addition Indigenous people want banking services to be provided on a personal, private, face-to-face basis, by Indigenous staff.

Tackling these issues will require alternatives to the current delivery of banking and financial services to rural and remote Indigenous communities. It is imperative that these issues be addressed because there is a danger that services are decreasing in regions that have increasing Indigenous populations. For example, in the Northern Territory the proportion of the population that is Indigenous in towns with fewer than 600 people is 81 per cent. Nationally, at a broad regional level, Indigenous Australians represent a steadily growing share of the population and economy of those regions. Between 1981 and 1996, the Indigenous share of the population of remote Australia increased from 12.7 per cent to 17.8 per cent. Across Australia, towns of fewer than 1,000 people have been most disadvantaged by banking deregulation and the adoption of new technology. The Prices Surveillance Authority in their 1995 inquiry into fees and charges imposed on retail accounts by banks and other financial institutions argued that:

Access to a financial transactions account is necessary to conduct the personal business of everyday life in a modern economy. All citizens require this access regardless of income, employment status or personal circumstances.

Bank fees have increased substantially from the early 1990s and have been the subject of much discussion in this place over the last couple of days. Last year, the parliamentary Joint Standing Committee on Corporations and Securities reported that evidence indicates that fee restructuring has been used by banks to retain `high-value' and to remove `low-value' customers.

Low-balance customers, many of whom are Indigenous, pay disproportionately more for what is fundamentally an essential service. Recently, I was given an example where a bank customer with $1,400 of deposits paid over $140 in fees over a three-month period. There is a clear need for financial literacy programs which teach people how to minimise account keeping fees. A situation exists where Indigenous Australians have less access to and pay more proportionately for financial services. These are, after all, the poorest Australians, the most disadvantaged Australians and those most stricken by poverty. This impacts on communities in managing their consumer spending and developing business activities. It leads to Indigenous people relying more on larger centres for such financial services and entails travel and disruption to community life. It leads to desperate consumer practices in Indigenous communities that are open to abuse.

In the month of September, it came to my attention that a number of our banks, but in particular the ANZ Bank, were allowing people to overdraw their accounts when making electronic withdrawals and were charging them $29.50 for the privilege. One elderly Aboriginal person was slogged with this fee four times in one month. This equated to 25 per cent of her monthly earnings. When people approached the bank in Katherine, they were told that the only way to have this facility taken off their accounts was to write a letter to the bank.

I approached the ANZ, which came back with a couple of explanations. Firstly, they allow people to do this only on what are effectively cheque accounts. That is clearly false. This raised the question: what were the banks doing by giving Indigenous people these types of accounts? Secondly, the bank identified an error in their system when changing the accounts they offered from seven types to three. This meant that some people who previously did not have the ability to overdraw their account electronically had that ability for a period of three months from April to June this year. The bank said they are happy to refund any honour fees—as these are called—that were incorrectly charged. However, they have failed to indicate who was affected and how many of them there were. They also argued that this happened over a confined period.

One of the interesting sidelights that have come out of this is the amount of money people are charged to use electronic banking machines. It needs to be understood that, as a result of decisions taken by Centrelink, people who live in remote areas are now seeing their payments made into electronic accounts. The charge for using these accounts is in the order of $1.25 per transaction. That is just to go and put your card into the machine to establish whether you have any money in the account. If you have no money in the account, that just adds to the difficulty of dealing with an overdrawn account.

In the Northern Territory people are being charged for overdrawn accounts that should not be overdrawn, because there is no capacity in their account arrangements for them to be overdrawn. I know what happens when I go to the bank and there is no money in my account: my card is spat out and no money is forthcoming. Here we have an arrangement where effectively the most impoverished people in the community are being allowed to overdraw on accounts using these electronic transactions; have the transactions debited against their accounts; and then find, when they have money paid into the account from whatever source, that the account has horrendous charges listed against it. That is neither fair nor reasonable.

One of the interesting things here is that the banks accept no obligation to educate their clients as to their responsibilities in terms of the accounts they sign up to. We find that, as a result, many people who live in the Northern Territory are under financial stress, simply because they do not understand the nature of their accounts. When they sign up to an account they are not told what its transaction fees are. In many instances these people are illiterate. What are the banks going to do to ensure that all of these people are educated in such a way as to ensure that they can properly use the financial services made available to them without suffering as a result? It seems peculiar to me that we are in a situation where people are effectively forced to use electronic transactions, yet the banks apparently accept no obligation to ensure that people understand the nature of the account and their obligations to the bank as a result of signing up to the account.

This raises a very serious question. It is clear that, in remote parts of Australia—and particularly in my electorate of the Northern Territory—in all but a very small number of places banks do not provide the services themselves. They might provide the resources through the account, but there is an ATM in the community at which people draw against that account, and the banks themselves do not appear. It raises a real question about what the banks' responsibilities should be in relation to those communities. People might have signed up to certain accounts, but they do not have access to the full range of banking services, nor does it appear that they are going to.

Whilst the legislation before us makes some very commendable changes to the way banks and other financial institutions are to operate in terms of the prudential requirements, I want to make sure that the banking industry understands that there are people—and I have spoken to representatives of the banking industry about this—who cannot afford to be treated with the disdain with which some banks have been treating them. That is not only because they do not have the financial resources but also because of the implications for them and their families. They are already in poverty; they now have exorbitant charges imposed on them for accounts they do not properly understand. In many cases they are also allowed to overdraw on accounts and are then charged honour fees on those overdrawn accounts. In some cases it is possible for someone to draw out, say, $30 and be charged $20 for the privilege because it is an overdraw.

It seems to me that you do not have to be Einstein to work out that the interest charged on those overdraws is usurious. If you sat down to negotiate a loan of $30, $50 or $100, you would not agree to pay 50 per cent, 75 per cent or even 100 per cent interest, would you? It seems to me that the banks have got away with too much in relation to these issues, and the people who are suffering—the people who are paying—are those least able to afford it: the poorest members of our communities. I say to the banks that they are on notice. I support the remarks made in this chamber over the last few days by members of the opposition calling the government to account over the issue of banking and calling on it to ensure that the services given to Australians, wherever they might live, are properly understood and that people are not disadvantaged as a result of them.