5 October 2017
Consumer group CHOICE is calling for an end to commissions schools receive for signing kids up to bank accounts.
The call comes in CHOICE's submission to the Productivity Commission's Inquiry into Competition in the Australian Financial System.
"School banking programs such as the Commonwealth Bank's Dollarmites program give banks unfettered access to market their brand to school children," says CHOICE CEO Alan Kirkland.
"These schemes, which give schools a kickback for every new account opened by a child, allow banks to cement relationships with children as young as five in the hope that they become lifelong customers.
"Rewarding children for saving with cheap toys easily transitions to rewarding young adults with "special" offers of high-interest personal loans and credit cards.
"It is time to take banks out of financial literacy education, and to stop them from paying schools commissions to flog their products," says Mr Kirkland.
In its submission CHOICE also called for improved disclosure to enable consumers to better evaluate the cost of financial products against the rest of the market.
"We want to see the banks give consumers better access to their own transaction and consumption data to promote switching and boost competition," Mr Kirkland says.
"These changes will make it easier for consumers to shop around for the best deal, and force banks to work to keep their customers.
"To improve competition in this sector, we don't need more banks, we need better banks.
"We also need policy reform to counteract the ability of the major banks to capture major sections of the market while charging higher prices than many of their competitors," says Mr Kirkland.
Media contact: Tom Godfrey, CHOICE, Head of Media and Spokesperson: 0430 172 669
Key school account stats:
- 24% of people got their first banking product through a school or community program
- Most people got this product between the age of 6-12
- Over one third (35%) of people haven't closed their first account
- Schools receive a $5 upfront commission for every Dollarmite account activated, and a further 5% of every deposit made at the school (capped at $10)
- In 2016 Commonwealth Bank paid $2.3 million in commissions to schools