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Thursday, 21 June 2007
Page: 11

Senator FIELDING (Leader of the Family First Party) (9:54 AM) —I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

Family First is fed up with banks making massive profits by ripping off customers with exorbitant bank fees.

Australian families are struggling to make ends meet and copping a penalty fee of up to $50 can be a devastating blow.

That is why Family First is introducing the Australian Securities and Investments Commission (Fair Bank and Credit Card Fees) Amendment Bill 2007, which aims to stop banks slugging customers with unreasonable penalty fees on their accounts and credit cards.

Australians are being robbed by the banks and it is no surprise that the banks are pocketing bumper profits. Banks are a licence to make money. Last year the NAB posted a record profit of $4.4 billion while the ANZ reaped $3.7 billion.

It is time to stop the bank’s ruthless profit grab and time to stop banks fleecing vulnerable Australians.

Family First is particularly concerned that low income families are hardest hit by penalty fees for every dishonoured periodic payment, direct debit or cheque.

For some Australians, that is a third of their weekly income, and a huge burden.

A 2004 report revealed some banks seize up to 16 times the cost of processing dishonoured cheques, and 92 times the cost of processing dishonoured direct debit transactions!

Family First’s Bill will stop fee gouging by banks by:

Ensuring penalty fees are for cost recovery only. All fees and charges must be reasonable and reflect a fair estimate of bank costs;

Boosting the powers of the Australian Securities and Investments Commission (ASIC) to monitor penalty fees. ASIC will also have the power to investigate customer complaints and issues referred by the Treasurer;

Giving customers the right to sue banks for damages if they breach the ASIC Act.

Instead of ripping off customers, Family First believes banks should recognise they have community obligations and actually help customers to AVOID penalty fees.

Family First believes banks should offer credit cards that do not allow customers to exceed their limit.

And Family First believes that banks should ensure that fees appear on ATM screens and phone and Internet banking before transactions are processed, so customers are warned and can cancel their transactions.

Family First applauds the efforts of Choice Magazine and the Consumer Action Law Centre which have launched a new campaign against exorbitant penalty fees.

Family First agrees with Nicole Rich, the centre’s director of policy and

campaigns, who remarked that it was a real worry that banks claim they care

about community obligations, but then penalise low income Australians with fees that wipe out one third of their weekly income.

Family First urges Australians fed up by banks ripping them off to support the Choice and Consumer Action Law Centre campaign, which includes lobbying the Treasurer and other politicians to demand action.

Family First’s Bill covers banks, building societies, credit unions and other institutions that offer credit cards. It imposes two types of conditions on financial service providers.

Firstly, it would outlaw charging customers penalty fees for a transaction failing when the customer could have no reasonable expectation of knowing it would fail.

For example, the Bill would ban inward cheque dishonour fees, where a customer banks a cheque in good faith but is slugged a penalty fee because the person who wrote the cheque did not have enough money to cover it.

Most banks have abolished this fee, but not all of them. Why should a person be forced to pay a penalty for something they had no control over?

And secondly, the Bill states that penalty fees must be reasonable. They must be a fair estimate of the cost to the financial institution of the event that leads to the charge.

For example, if you write a cheque and don’t realise you have sufficient funds to cover it, you can be charged a reference fee of $30 and a dishonour fee of $50. So that’s an $80 penalty, apart from any embarrassment. Does that $80 penalty fee really reflect the cost to the bank?

Some banks, credit unions or building societies charge penalty fees for failed transactions on an ATM. You can be charged as much as $2 just for entering the wrong pin number, not completing a transaction, pushing the wrong account button or not having enough money.

The Bill provides a remedy of enforceable undertakings, so ASIC can negotiate with a financial service provider and get a written undertaking where there is concern over penalty fees. This saves both ASIC and the financial service provider having to go to court and should provide a faster resolution.

The Bill also gives customers the right to seek compensation if ASIC has taken successful action against a bank.

Family First’s Bill boosts the powers of the corporate watchdog so it can demand information from banks relating to any penalty fee investigations.

The Treasurer may also direct ASIC to investigate penalty fees.

Reserve Bank figures reveal late payment fees on credit cards have risen more than 50 per cent over the last five years from $20 to $31.

And fees for credit cards which are over the limit have climbed 500 per cent from $6 to $30.

The Australian Consumers Association points out that most Australians choose a bank account, credit card or housing loan for the benefits they offer.

Most people do not consider the penalty fees as they do not expect to pay them. That means there is not much of a competitive market to keep fees low.

Because there is strong competition in other areas of banking, it has been claimed financial institutions sometimes try to boost their funds through penalty fees.

It is interesting to note that bank fee income from households has been increasing at a faster rate than business fee income, for most of the last decade. In fact, last year, bank fee income from households topped $9.7 billion.

Unfortunately the Reserve Bank does not publish more detailed information about what percentage of those fees are penalty fees.

Why don’t banks offer customers a credit card which will not allow you to go over the limit, rather than charging a penalty fee when they do?

Why don’t banks warn their customers, for example with an email or SMS, when their card is expected to go over the credit limit with pre-arranged automatic payments, rather than just hitting them with a penalty fee?

By all means financial institutions should be able to cover the reasonable costs of a transaction. But we must stop banks using penalty fees to reap even more millions.

Senator FIELDING —I seek leave to continue my remarks.

Leave granted; debate adjourned.