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Wednesday, 9 October 1985
Page: 946


Senator COLSTON(7.15) —On 10 September a question was asked in this place of the Minister for Finance, Senator Walsh, in relation to home loans and loan service fees. The issue was raised by Senator Haines. The relevant matters which were discussed in the question and answer on that date were as follows: The Government has for some time had a ceiling on housing loan bank interest rates. That ceiling is currently 13.5 per cent. Senator Walsh stated in his reply that there are no Government proposals to alter that ceiling. The Minister for Finance said that some financial institutions at that time were charging the regulated ceiling of 12.5 per cent. Others apparently were not, 13.5 per cent being suggested as the lowest interest then applying.

A further matter raised was the service charge which some banks are now levying on their customers. Those fees, which have been introduced recently, vary. For the Commonwealth Savings Bank of Australia, they range from $30 to $90 a year for mortgages from $1,000 to $100,000. For loans over the latter sum higher loan service fees are payable. As far as I could understand on 10 September, the thrust of Senator Haines's question was not directed at the actual amount of the service charge, even though that was an important consideration. What appeared to be more important was that some financial institutions might be using the loan service fee as a back-door method of thwarting the Government's intention of keeping home loan bank interest rates at a maximum of 13.5 per cent. If that was the major thrust of the question, the Minister did not address that matter in great detail.

Following complaints which I have received from Queensland residents, I intend to speak on this matter as well. There seems to be a fair amount of evidence that at least one bank-probably there are others-has introduced a loan service fee with the aim of thumbing its nose at the 13.5 per cent interest rate ceiling which has been set by the Government. My comments refer specifically to the Commonwealth Savings Bank of Australia, but probably apply equally to other financial institutions. Those who have home loans from the bank are now paying 13.5 per cent interest. In addition, they have now been served notice that they will pay a loan service fee which will be levied half-yearly. Anyone with an oustanding balance of $30,000, for instance, will be required to pay an extra fee of $70 per year. To my mind, and certainly to the minds of my constituents who have approached me, this is nothing but a deliberate ploy to counter the 13.5 per cent ceiling set by the Government. For the Government's own instrumentality to do this is appalling behaviour.

Those who have approached me have received a circular letter entitled `Loan Service Fee'. In part, the letter states:

Due to the continually rising costs of maintaining and servicing home loan accounts, we have found it necessary to introduce a small Loans Service Fee to offset these expenditures.

The letter goes on to mention that the fee will be levied half-yearly and mentions the actual charges, some of which I mentioned earlier. I find it hard to believe that the claim of `continually rising costs of maintaining and servicing accounts' is truthful. Has the extensive use of computers in the banking industry increased costs? Surely costs should decrease as computers continue to take over tasks that were previously performed manually; or is the claim of rising costs an admission of inefficiency? Perhaps to some extent it is, but is more likely that it is a spurious claim to camouflage a strategy aimed at circumventing the 13.5 per cent ceiling. I do not intend to burden Hansard by seeking to incorporate the text of the Commonwealth Savings Bank letter. However, I seek leave to table a copy of the text in case it is of use to honourable senators.

Leave granted.


Senator COLSTON —I thank the Senate. When the Minister for Finance spoke on this matter on 10 September, he remarked that the service fee represented only a small increase in the interest rate which the borrowers are paying. This is acknowledged, but I must mention two points: Firstly, an extra commitment of $50 or $70 a year is a real burden on many of the constituents whom I represent. It is far too easy to sit here in the Senate chamber and forget the daily struggles faced by some people out in the real Australia. An extra burden of the type I mentioned can make this struggle even more severe. If I may digress for a moment, I should say that when I first entered this chamber, this was one of the particular groups which I expected a Labor government would protect. I still expect it to do so. Secondly, I would need great persuasion to be convinced that the bank which I mentioned is not like the tax evader, trying to find loopholes in the government directive that the ceiling be 13.5 per cent for housing loan bank interest rates.

The Minister said on 10 December:

The Government will keep under review the home loan service charge to ensure that it is not used as a surrogate interest rate increase.

I ask the Minister and the Government not only to keep these charges under review but to scrutinise them carefully at this stage. A fundamental question is whether the loan service fees can be justified, especially as banks operated without them prior to this. I ask the Government to address this question as well.

There is little, if any, pain for a large corporation to increase its charges when its customers are locked in, cannot go elsewhere and must pay whatever is charged. For those having to pay, however, there are difficulties and if I have to take sides, it will be on the side of the consumer. It may be too much to ask the banks to look at their own consciences, but I do ask them to do that.