Consumer advocate CHOICE is urging Australian banks to go further in their response to COVID-19, flagging that many Australians are still being harmed by high cost credit cards, personal loans and long term debt.
"We welcome that many banks have announced initial support packages for customers but we know they can go further. We have Australians who are now out of work but still paying over 20% interest on credit cards. The fair thing to do is acknowledge that we're in a record low interest rate environment and ensure that all bank customers who are struggling to make repayments have access to relief," says Alan Kirkland, CEO of CHOICE.
"Banks shouldn't forget the lessons learned from the Banking Royal Commission. They need to go further to look after their customers in these difficult times."
CHOICE says there are five urgent actions Australia's banks need to take right now:
CHOICE's five urgent COVID-19 actions for banks
1) Pause debts for up to 6 months for people in financial hardship
2) Cap credit card interest at 10%
3) Waive long-term credit card debt
4) Pay Royal Commission remediation as soon as possible
5) Recommit to Royal Commission reforms
"We've written to each of the major banks asking them to take these five urgent actions to help Australians who need it now."
CHOICE is calling on its community of over 220,000 Australians to hold the banks to account and demand better. Australians can join the campaign at choice.com.au/CovidBanks
Media contact: Katelyn Cameron, email@example.com, 0430 172 669
Quotes attributable to Alan Kirkland regarding each urgent COVID-19 action:
Pause all debts for up to 6 months for people in hardship
"The Government has talked extensively about hibernating the economy so that it can recover later and we need the same approach for people who have lost jobs and income. The major banks are allowing payments to be deferred on mortgages but they will continue charging interest while payments are paused. Their response to people with credit cards and personal loans has been piecemeal at best. The banks should offer to pause all debts for people in hardship with no exceptions. All interest, fees and charges should also be paused, so that people in hardship don't end up with larger debts."
Cap credit rate interest at 10%
"We've seen interest rates drop on mortgages but remain stubbornly high on credit cards. It's time for the big banks to help their credit card customers by dropping to a fair interest rate of no more than 10%."
"Right now only two credit card products offered by the big four banks have an interest rate below 10%. This is outrageous when banks are reaping the benefits of a 0.25% cash rate. It's time to lower interest rates for all customers."
*12.99% from 27 April 2020.
Waive long-term credit card debt
"Some Australians have been paying off their debt over a long period. We know in 2018 that one in six Australians were struggling with persistent credit card debt. We need to make sure that this number doesn't rise at a time when many people find themselves suddenly unemployed or in a tough financial position. The banks know who these customers are, which is why we are asking them to waive long-term credit card debts that people are unlikely to ever be able to repay."
Note: there is precedent in the Bulk Debt Project. This project saw around $30M in debts (with a range of providers) waived over 3 years: http://www.powertopersuade.org.au/blog/the/12/3/2016
Pay Royal Commission remediation as soon as possible
"The Banking Royal Commission revealed misconduct that sees customers owed hundreds of millions of dollars in remediation but banks are taking far too long to pay out. We need the banks to hurry up and get this money back to Australians at a time when they need it the most."
Recommit to Royal Commission reforms
"The banks can prove that they've learned their lessons by recommitting publicly to the suite of reforms from the Banking Royal Commission."