Aust consumer groups attack bank fees

Australian banks charged customers nearly A$1 billion ($1.3 billion) in penalty fees last financial year and consumer groups say the charges are unfair and unethical.

Bank fees from households rose by 8 per cent to A$4.9 billion in the 2007/08 financial year, says a report by the Reserve Bank of Australia released last week.

The report says A$961 million, or 20 per cent, of total bank fees came from "exception fees", a banking term for penalties on late payments or overdrawn accounts.

Customers face charges of A$35 to A$50 for overdrawing their accounts or paying credit card bills late, according to the Consumer Action Law Centre in Melbourne.

"The issue is that the people who pay most of these fees are on a low income, they're struggling financially," the centre's policy and campaigns director, Nicole Rich,said.

"That's why it's particularly unfair, because it's people who can't afford to pay [who] pay the most.

"They contribute to people taking longer to get out of debt. It's really a problem."

The first of its kind, the Banking Fees in Australia report found the 8 per cent surge in fees was because people were using banks more.

Australian Bankers Association chief executive David Bell said banks had created "exception fee free accounts" that incur no penalty fees and do not allow overdrawing on the account.

"For some years now, for two or three years, banks have been working towards dealing with this problem," he said.

"[Some consumer groups] are stuck in the groove of wanting to criticise everything."

He said consumers could avoid excessive fees by using only their own bank's ATMs, ensuring accounts were not overdrawn and paying credit card bills on time.

In 2008, a Family First senator, Steve Fielding, introduced a bill designed togive the Australian Securities and Investment Commission power to regulate whathe termed excessive banking fees. In September, a Senate economic committee inquiry into the legislation, called the Fair Bank Fees and Charges Bill, found it could not support the proposed law.

In its report on the inquiry, the committee acknowledged it was "concerned about the social effects of default fees on consumers, particularly on those on low incomes and on welfare recipients".

On Thursday Senator Fielding said the Reserve Bank report proved that the banks were ripping off "ordinary Australians to fund their massive profits".

"Families are hit hard by penalty fees of up to A$50 for every dishonoured periodic payment, direct debit or cheque" he said.

"Who can afford A$50 for a minor mistake? Why should people be forced to pay fees in cases where it is out of their control?"

Consumer group Choice said charging customers for overdrawing on their credit cards was an unfair and unethical practice.

- AAP