Key Points:

Banks are accused of charging customers hundreds of dollars a year in unnecessary fees - despite raking in huge profits.

Consumer and banking experts told the Herald on Sunday that fees varied between banks, creating a potential for overcharging.

Budgeting advisers say the poor are bearing the brunt, with some paying up to $30 a week in charges - more than $1500 a year - when they can barely afford food and rent.

A customers' group has called for government regulation to limit bank profits, estimated at a combined $2 billion a year by Consumer NZ.

Charges show no sign of dropping. The BNZ has doubled fees for customers who withdraw money from other banks' ATMs. A debit card withdrawal now costs $1 and a credit card advance $2.

The Salvation Army's Auckland director Gerry Walker said some people seeking budgeting advice were paying up to $30 a week in fees for late payments, dishonoured cheques and overdrafts, and the people who could least afford it were "most definitely" suffering most.

"This is being identified as a growing problem. People don't always read their bank statements and what's being charged and whether they can afford those charges.

"It doesn't sound much to some people on high incomes but it can equate to 5 per cent to 10 per cent of people's incomes."

Walker said the kind of people getting into trouble were the least likely to challenge banks or seek better deals.

"It's a matter of shopping around, but it's easier said than done for some people who are not used to doing that. There is an element of fear around banking institutions."

He said that when people got into financial trouble the by-products were late fees and bank charges.

"It's a vicious cycle and it's a difficult cycle to escape from. That's where we can help to negotiate a better deal for people."

Bank Customers Action Collective spokesman Gray Eatwell called for government regulation to prevent banks "profiteering" on fees and credit card charges when many people were in such dire straits.

"It's getting very serious. More and more people by the day are finding it difficult to meet their payments. It's driving a lot of people to the wall, as simple as that.

"The banking industry has a habit of thinking they are immune. The banks don't have a God-given right to profit."

Eatwell said other Governments had taken action to curb runaway bank fees but New Zealand regulators were "dragging their heels".

"The banks are not going to back off until they absolutely have to. We all have to have bank accounts. I believe there is an obligation within the banking industry to make it safe - and at the moment it isn't."

ANZ, BNZ and Westpac announced large profits for the six months to March - with increases of between 7 and 14.9 per cent on the same period last year.

Their spokesmen did not return calls yesterday.

Kiwibank spokesman Bruce Thompson said his bank charged a standard $30 penalty for things such as failed direct debits and advised customers to "work with their bank".

"If people know they are going to miss a payment, they should ring the bank first and try to do what they can to avoid the payment failing. Maybe they can arrange a short-term overdraft."

Thompson agreed with the Salvation Army that it was people least able to afford penalties who usually ended up paying them, but wouldn't comment on whether he thought the charges were too high.

"Nobody likes paying parking tickets or speeding fines or penalty payments. I don't think any bank member would be without empathy with people who get themselves into financial difficulties."