Scammers are falsely using Consumer Action's name to obtain money and banking details from their victims."
Banks, credit unions and building societies charge fees of up to $40 when consumers exceed their credit limit, pay their credit cards one day late or fail to have sufficient funds in their account when a direct payment is due. While banks have modifed their terms and conditions, possibly as a result of publicity given to the issue by CHOICE, there is still a long way to go.
These fees are unfair:
- The amount of these fees bears no relation to the cost incurred by the financial institution as a result of the consumers default. For this reason they may be unlawful as well as unfair.
- Banks could easily help consumers to avoid fees but choose not to. They could offer credit cards which can’t go over the limit, or they could warn consumers that a payment is due but there are not enough funds in the account.
Bank income from fees is increasing rapidly. Some fees are legitimate, but others are nothing short of price gouging. The time has come for banks to get rid of some fees and make others fairer.
CHOICE published its first review of bank penalty fees in 2005, following a Consumer Action report into unfair bank penalty fees in December 2004.
In the UK hundreds of thousands of consumers (some say more than a million) have demanded that their bank repay unfair fees. The UK Office of Fair Trading has imposed limits on fees and is holding an ongoing investigation.
Now it’s time for action in Australia!
What we want
Banks and other financial institutions should:
- Eliminate inward cheque dishonour fees.
- Introduce systems to provide a greater range of options and real-time information to consumers where there are insufficient funds to make a due payment. These might include simply declining payments without charging a fee, an automated system to notify consumers by email or text message (or perhaps for concession card holders without electronic facilities, by phone), or by automated message via the ATM or EFTPOS system, before the payment is processed.
- Adopt one of the following responses to credit card over-the-limit and account overdrawn honour fees:
- eliminate the fees altogether (we note that credit cards operated successfully in Australia for some 20 years without such fees)
- offer consumers a choice between declining transactions (at no cost), or charging a reasonable fee no more than the actual cost to the bank or say 2-3% of the amount by which the consumer has exceeded the limit/overdrawn their account, whichever is lower.
- Ensure that all other penalty fees are limited to the actual costs incurred by the institution.