Joint submission: Review of the Code of Banking Practice 2007-2008
CHOICE and Consumer Action support and endorse the joint consumer submission to the Review of the Code of Banking Practice. This submission concentrates on the issue of bank penalty fees in more detail.
The Code of Banking Practice seeks to promote good banking practice for banks to follow when dealing with customers, but it’s failing to achieve good practice in the area of bank penalty fees.
Bank penalty fees are a major consumer issue. Penalty fees are often charged in circumstances outside of the consumer’s control and can result in hundreds of dollars in lost income for relatively minor defaults. The fees have increased rapidly in recent years and bear little relation to the underlying cost of the transaction.
The Code currently requires that fees are disclosed to customers. But disclosure isn’t sufficient to protect consumers when fees are exorbitant and are charged in unreasonable circumstances.
We believe that banks could do more to minimise the impact and incidence of penalty fees. Fewer and lower penalty fees will deliver a more efficient banking system and a fairer society.
We do not consider that the interim recommendation on this issue in the Issues Paper to the Review will deal effectively with the problems surrounding bank penalty fees.
As part of our Fair Fees Campaign against unfair bank penalty fees, we call for the following changes to the Code to enshrine good banking practice regarding penalty fees:
- Disallow unavoidable fees – including deposited or ‘inward’ cheque dishonour fees (third party dishonour fees) and penalty fees triggered by the bank’s own fees and charges
- Seek customer approval for transactions exceeding the customer’s credit card limit
- Do not process account over-draws without the customer’s consent
- Exclude penalty fees from concessional bank accounts
- Ensure the level of fees is referable to the direct costs involved in processing the default and set out what can be considered direct costs
- Ensure customers are given a real-time warning that a penalty fee will be imposed if a particular transaction goes ahead
- Establish standard penalty fee names.
To read our submission, click here: Review of the Code of Banking Practice 2007-2008.