Steve Fielding (Victoria, Family First Party) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to table the explanatory memorandum and 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 while ripping off customers with exorbitant bank penalty fees.

That is why Family First is introducing the Australian Securities and Investments Commission (Fair Bank and Credit Card Fees) Amendment Bill 2008, to stop banks slugging customers with unreasonable bank penalty fees on their accounts and credit cards.

Banks are a licence to make money. Their focus is their shareholders, which is why families need the Parliament to step in to look after their interests.

Last year the big four banks produced bumper profits for their shareholders:

• Westpac announced a record profit of $3.4 billion, up 12 per cent;
• ANZ Bank posted a record $4.2 billion net profit, up 13 per cent;
• National Australia Bank’s profit was up 4.2 per cent to $4.6 billion; and
• Commonwealth Bank’s profit increased 18 per cent to $4.6 billion.

Yet the big four still charge their customers as much as $50 for a mistake that might be a bounced cheque or an electronic payment that isn’t honoured.

A 2004 report by the Consumer Action Law Centre 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!

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.

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

Banks should offer credit cards that do not allow customers to exceed their limit.

Banks should also 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 and the Consumer Action Law Centre which launched a campaign against exorbitant penalty fees.

Family First’s bank penalty fee bill has incorporated expert advice from the Law Council, Choice and the Consumer Action Law Centre.

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

• Ensuring penalty fees are for cost recovery only;
• Giving the Australian Securities and Investments Commission (ASIC) the power to demand information to ensure fees reflect costs;
• Boosting the powers of ASIC to monitor fees and investigate customer complaints and issues referred by the Treasurer;
• Outlawing inward cheque dishonour fees;
• Stopping penalty fees charged because another bank charge has pushed the customer over or under the necessary bank balance;
• Preventing penalty fees for customers exceeding their credit card limit where the bank does not give customers the option of a solid maximum credit limit; and,
• Banning charging multiple fees for the same mistake.

Family First’s Bill covers banks, building societies, credit unions and other institutions that offer credit cards.

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?

The Bill also 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  don’t 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 preserves customers’ 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, in 2006 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.

I seek leave to continue my remarks later.

Leave granted; debate adjourned.