Banks behaving badly have made front-page news over the ditch for the past few months.
Australia's Banking Royal Commission found a wide range of appalling practices by the parent companies of Westpac, ASB, ANZ and BNZ. Although banks here haven't been caught doing such alarming misdeeds, they still do things that simply aren't in customers' interests.
New Zealand banks had their knuckles rapped in 2015 when the Financial Markets Authority (FMA) analysed complaints and found that some had been getting customers to switch their KiwiSaver to them using inappropriate means. Sometimes the customer didn't even realise they'd agreed to switch providers, having been given a form to complete along with a mortgage application.
There is good news. In the week that I was chewing this article over, ANZ announced it is ditching the hard sell. Frontline staff won't be rated on the products they sell - something that came in for criticism in Australia and that the banking union FIRST disapproves of.
New Zealand's Responsible Lending Code, launched in 2015, also cleaned up some of the worst practices in the lending area. Where once, for example, if you guaranteed your child's home loan you stuck your neck out for all of their future lending, banks now require that you get independent advice. Some of the old contracts are still in existence, however, so beware.
Other practices catch customers unawares. The first that came to mind was the way they drop their savings interest rates quietly for existing customers, hoping you won't notice. I monitor my accounts regularly. One minute I open an account paying competitive interest and next the rates have been dropped as low as 0.10 per cent. It's essential as a customer to stay on your toes and switch to the new accounts when they launch.
When I put the word out that I was looking for opinions about the worst practices to warn readers about, one former banker expressed his displeasure at the way some customers are left out of fee-free banking because they have savings, not a mortgage. I noticed that at my bank you need to have business with it of more than $200,000 – either saving or borrowing to qualify. You need to know this, however, and apply. So they're not handing it out unless you ask the question.
What also winds me up is the charging of honour or unarranged overdraft fees on EFTPOS payments. Should I try accidentally to use my EFTPOS card when there is no money in the account the bank "honours" the payment and then hits me with a fee.
The bank won't allow customers an account that says "no" when the balance is zero. I'm not going to be embarrassed if my card declines. And if someone is too poor to have enough money in their account and can't whip out another card, they get hit with a charge they can't afford.
I haven't been caught in ages and have always screamed blue murder until the fee is returned. But this is a good earner for banks. Charging $10 to $30 for a transaction that no human hand has touched could be seen as a money grab.
Back on the going guarantor front, a mortgage-broking contact tells me that, even with the new practices, guarantees on a home loan may hang around for a couple of years after the loan is paid off. What's more, he still sees instances of customers guaranteeing others' car loans without realising it means they could be forced to pay.
Credit card travel insurance is great. Just watch out for "activation". That means your insurance doesn't cover you unless you buy your travel tickets with the bank's credit card or other specified methods.
Another issue is how interest is charged on credit cards. The rules are as clear as mud. One Consumer member who posted online found to her horror that $376 had been charged to the card after she'd paid off a much bigger sum just before due date. By the time she realised there was more to pay she was three days late. Because the entire bill wasn't cleared by due date she had to pay $249 interest for that month. That equated to 66 per cent on the $376, because unless the total is cleared it's all subject to interest.
Following the revelations over the ditch, the FMA and Reserve Bank of New Zealand hauled the banks before them in a joint operation and told them to review their operations here to ensure they weren't up to the same tricks.
The FMA is currently interviewing front-line bank staff to get a feel for what is or what's not going on here. It will, however, take time for the results of that Conduct and Culture Review to come out in the wash.
Whatever the outcome, it's a really good idea to watch what's happening to your accounts and complain to the bank, the Banking Ombudsman and/or the FMA if it doesn't seem fair.