ASIC calls on banks to improve migration into low-fee accounts
ASIC has called on banks to assist customers to move into low-fee accounts after it found consumers, including First Nations people, are being charged up to $3,000 in overdraw fees.
In the Better Banking for Indigenous Consumers Project, ASIC reviewed target market determinations for high-fee and low-fee accounts offered by major and regional banks.
ASIC issued notices to those banks requiring data on fees charged to consumers in locations with higher-than-average proportions of Indigenous people and for customers in receipt of Abstudy payments, a financial assistance program for Aboriginal and Torres Strait Islander students.
This found:
- Over 110,000 consumers in identified locations with higher-than-average proportions of First Nations people and in receipt of Abstudy payments are in high-fee accounts, despite being eligible for a low-fee account.
- These consumers paid over $6 million in fees over a 12-month period, which would have been avoided were they in a low-fee account.
- The most prevalent fee was an ‘overdraw’ fee, which is not charged on a low-fee account.
Many Indigenous consumers identified in the data were in high-fee accounts paying high fees, despite being eligible for a low-fee ‘basic’ account.
The majority of banks’ processes to transfer eligible customers to low-fee accounts were ineffective, ASIC said, with migration rates as low as between 0.5 and 3 per cent.
ASIC commissioner, Danielle Press, said: “It’s unacceptable that we have found many consumers continuing to experience harm through transaction account fees, when banks know these people could be in low-fee accounts.
“Current processes to transfer eligible customers to low-fee accounts are overwhelmingly ineffective. We have raised these issues with the banks included in the review. ASIC wants to see action taken swiftly to change these customers to a low-fee option.”
In response to the review, ASIC has written to banks and asked them to:
- Migrate all eligible transaction account customers in Indigenous Pilot locations and those on Abstudy to low-fee accounts on an ‘opt-out’ basis
- Ensure that fees are removed for new and existing customers, when products are altered and fee structures changed to remove particular fees
- Review and improve TMDs and account opening procedures in line with design and distribution obligations to prevent future harm of this type to all prospective customers
- Remediate impacted customer
- Make procedural changes to tailored Indigenous services to better meet their commitments to their Indigenous customers.
Since ASIC’s review, one bank has taken positive steps to improve its TMDs including by removing overdraw, dishonour, account maintenance and withdrawal fees from its transaction accounts for all customers.
AUTHOR
Laura Dew
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