The major banks have made much of their efforts, as part of 'Team Australia', to help Australians through increasingly tough economic times as the coronavirus pandemic has unfolded.
They deserve some credit for their initial response, rapidly shifting their customer service teams to help people in financial hardship and offering pauses on repayments for many people with mortgages.
Our fear, however, is that this won't be enough. Pauses on mortgages have unfortunately been styled as a 'repayment holiday', which is a particularly positive spin on a period in which interest will continue to be charged, meaning that your debt will continue to grow. Relief for people with personal loan and credit card debts has been inconsistent.
We have called on the banks to waive interest charges temporarily for people who are unable to make repayments. We know that this is possible. The customer-owned Greater Bank is pausing interest charges on credit cards for up to six months and Westpac is allowing temporary pauses on interest charges on credit cards and personal loans. Given that banks make money through interest on debts, this may seem counter-intuitive. But banks and their customers share an interest in ensuring that a debt is repaid over time where this is possible.
Millions of Australians are still waiting on money that is owed to them as a result of the scandals revealed by the royal commission
We think that credit cards deserve special attention. It's now easy to get a credit card with an interest rate of less than 10% from some institutions, yet most of the credit cards offered by the major banks come with rates of around double that. Even their 'low rate' cards come with uncompetitive rates – on the ANZ 'low rate' card, you could find yourself paying as much as 20.24% on part of your balance. With the cash rate close to zero, these rates need to come down.
We also need the banks to help the government finish the reforms recommended by the banking royal commission. Throughout the global financial crisis, we saw many people go uncompensated after losing their retirement savings through poor advice or mismanagement. To stop this happening in the future, the royal commission recommended the establishment of a compensation scheme of last resort, funded by industry. Now, more than ever, we need the banks to help the government make this a reality – and restore community faith and trust in the financial system.
Finally, the banks need to finish paying the compensation that they already know about. Millions of Australians are still waiting on money that is owed to them as a result of the scandals revealed by the royal commission. Ensuring that this is processed fast and fairly could make a big difference to many people when they need it most.