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Four banks have had to pay up following an investigation by ASIC regarding their conduct towards low-income customers.
The Australian Securities and Investments Commission (ASIC) has conducted a review of four Australian banks and found that all four banks “systematically” charged high fees to customers who could least afford it and who were eligible for low-fee accounts.
The review collected and analysed account data between November 2022 and March 2023 from the Commonwealth Bank of Australia (CBA) (and its Bankwest division); Bendigo and Adelaide Bank; Westpac Group (including St.George, BankSA, and Bank of Melbourne); and ANZ.
As a result of the review, the banks will refund $28 million to bank customers on low incomes, including First Nations customers, over the next 12–18 months.
This includes $24.6 million that will be refunded to customers who are in areas with significant First Nations populations and customers who are receiving ABSTUDY payments (a group of payments for Aboriginal and Torres Strait Islander students and apprentices).
ASIC’s report found that the banks kept at least 2 million Australian customers in high-fee accounts, including many customers who relied on Centrelink payments to make ends meet.
The banks have migrated an excess of 200,000 customers into low-fee accounts following the review, which ASIC expects will save those customers approximately $10.7 million in future yearly savings.
Alan Kirkland, ASIC’s commissioner, said that the banks that were reviewed have caused “financial distress” through fees that were avoidable and “complicated bank processes” that frequently create barriers for remote and regional consumers.
He said that the banks knew that many of their customers on low incomes were in “inappropriate high-fee accounts” and that it has taken ASIC’s intervention to “force them to act”.
Kirkland said: “Before our review, most banks only provided their customers with difficult ‘opt-in’ processes for switching to low-fee banking options, including forcing some consumers to travel hundreds of kilometres to their nearest bank branch.”
ASIC’s review was initially focused on improving financial outcomes for First Nations consumers by investigating avoidable bank fees; however, the findings have resulted in “broader outcomes” for people who are on low incomes nationwide.
The commissioner welcomed the action taken by the banks, however, also said that more steps need to be taken by the banks to ensure that the issue does not occur again.
“This is the second report from ASIC in the last two months that highlights where banks have failed to put customers’ needs at the heart of their operations,” Kirkland said, speaking about research conducted last month that found a ‘concerning’ number of Australians were not seeking financial support.
Kirkland said that the two reports emphasise the influence of the banking system on Australians.
He said: “Fair banking services for all Australians, including those on low-incomes or located in regional or remote areas, are critical for our financial system.
“Banks need to ensure they have systems and processes in place so customers on low incomes can easily transition to low-fee accounts, regardless of their location.”
The commissioner said that ASIC expects all banks across the country to consider the findings of the report and improve the “accessibility and distribution of low-fee accounts and commit adequate resourcing to specialist First Nations services”.
[Related: Brokers urge proactivity from borrowers in seeking financial help]
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