02.the non-bank option
We’re not the only ones who think the penalty fee rort is a case of greed posing as need. In fact, some lawyers are questioning whether charging more than it cost to fix the problem is even legal. Australia’s biggest corporate class action to date was launched last year, aiming to recover at least $400 million in penalty fees charged since 2004.
After all, the major banks are already pulling in massive returns on the collective deposits of consumers. In the case of transaction accounts – on which banks generally pay no interest – our calculations indicate this figure was in the neighborhood of $7.2 billion per year as of December last year. That’s quite a bundle. Why should banks charge us for routine banking mishaps on top of that?
The non-bank option
Not getting fleeced by fees should be a priority for any bank customer, but good service also counts – especially in the long term. As it turns out, many institutions that looked promising in the fee category did not fare well in CHOICE’s Banking Satisfaction survey in July last year, including the winner.
According to the Financial Ombudsman, 96% of transaction account disputes involved banks and only 4%, credit unions in 2008-09. Credit unions and building societies (also known as mutuals) generally charge more fees, but for some it’s a fair price to pay for better customer service.
Customer service complaints against banks are not limited to long waits on the phone or unresponsive staff. Customers have been pressured into buying financial products or misinformed about the types of accounts that best meet their needs. One recurring complaint is that banks introduce new types of accounts and reduce the interest paid on existing accounts without letting customers know.
In general, the feedback we’ve gotten indicates that banks pay more attention to attracting new customers than keeping existing ones.
Louise Petschler, who runs ABACUS – the industry body representing credit unions and building societies – told CHOICE that customer service is the industry’s main advantage over banks and central to its culture.
“The difference between us and banks is the mutual structure. If you’re a member of a credit union or building society, you’re an owner. It does create a different dynamic. Our shareholding dividend has to be better service, and I would argue that we offer consistently better rates on loans and deliver better value over the long term.”
Credit union staff frequently call members if they’re about to incur a penalty fee, Louise says, and usually do not apply them in any case. Unlike banks, which have been known to fulfill their rate change disclosure duty by way of notices in the back pages of newspapers, mutuals inform members of rate changes by letter well in advance of the change.
“It’s about personal service, and it’s incredibly difficult for the banks to match that. Mutual organisations talk to their members much more effectively. It’s about offering tailored products, making exceptions and dealing with people’s personal circumstances.”