Menu
Cuzz Media

Cuzz Media

Cuzz Media is part of t...

NAB VICTIM

NAB VICTIM

In late 2008 we became vi...

Banking In Australia Today

Banking In Australia Today

Visit Banking in Austra...

Donate Please

Donate Please

We need your support. ...

Prev Next

Bank and financial services customers may have lost up to $201b due to misconduct, study finds

PHOTO: Analysts estimate the customer compensation bill for financial institutions may exceed $10 billion. (ABC News: Claire Moodie) PHOTO: Analysts estimate the customer compensation bill for financial institutions may exceed $10 billion. (ABC News: Claire Moodie)

More than half of Australia's population has lost money due to misconduct or inappropriate actions by financial services institutions such as banks, a University of Melbourne study has found.

The cost over the past five years alone has been extrapolated to an eye-watering $201 billion.

The figure far exceeds the estimates of compensation due to customers from recent scandals.

Many of those examples were uncovered in last year's banking royal commissions, which analysts estimate as floating towards $10 billion.

"The figures are truly shocking," said Fiona Guthrie, spokesperson for the National Debt Helpline. The helpline fielded 179,431 calls last financial year, a 4 per cent increase on the previous year.

"We knew that lots of people were affected by misconduct, but one in two is extraordinary."

The research builds on evidence presented at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry about the scale of wrongdoing that has fleeced bank customers.

ANZ chief executive Shayne Elliott was forced to admit that while there would be some double-counting of accounts, the number of his bank's customers who paid fees for no service was almost one-eighth of the entire adult population.

"If we look at all remediations that are underway, the total number of accounts affected [at ANZ] is approaching two million," he said in the royal commission witness box last year.

Professor Carsten Murawski from the University of Melbourne's Department of Finance said the study builds on what the royal commission found about the impact on consumers of poor decision-making inside our biggest financial institutions.

"The royal commission adopted a case study approach," he said.

"What we didn't have was an idea of the prevalence of those issues, the severity, across the population."

'Overwhelmed' consumers with 'lack of trust'

The survey of 1,029 people, backed by focus group research, found a trust deficit between consumers and institutions.

More than a quarter of respondents said they did not trust financial institutions or advisers, leaving them less likely to seek expert financial advice.

Trust is not the only issue. A sense of being "overwhelmed" by finances and financial products was cited by almost a quarter of respondents.

Professor Murawski, a co-author of FinFuture: The Future of Personal Finance in Australia, said such concerns require more than sympathy.

Improved financial literacy would help, he said, but products — and how you pay for them — need to be simplified.

"There's a limit to how you can achieve change in the [financial literacy] space," he argued.

"Even if you have a PhD in finance it's really hard to make sense of the terms and conditions of products."

The most common problems cited in the survey were issues Professor Murawski called "inappropriate but not illegal" such as high fees, being offered credit cards or increases to credit limits when not requested, poor or misleading information and being charged for services that were never received.

One of those issues, offering unsolicited increases to credit card limits, is now illegal.

'Some caveats' to the $201b number

The estimated cost of the issues cited in the survey is $201 billion over the past five years, based on an average cost per person of $20,473.

The median cost was much lower, at about $1,000 per person, meaning some of the survey respondents indicated high losses from their interactions with financial services institutions.

"Obviously there are some caveats to that number," Professor Murawski said.

"We're hopeful that people will look further into that and we'll have more detail in the future."

A lack of national standards for financial wellbeing was hurting consumers, he added.

This was highlighted this week when regulator ASIC and Australia's second-largest bank Westpac required the Federal Court to decide which one was right on how to appropriately check customers' expenses when approving mortgage applications.

"We don't have professional standards in terms of allowing us to determine the effect of certain services," Professor Murawski said.

Using the example of a consumer entering into a 20-year loan, different institutions use vastly different formulas to assess if someone is suitable to take on the commitment.

"We don't have a standard for how we would go about that … therefore it becomes really hard to tell, retrospectively, if a certain product or piece of advice was good or bad. Computing loss or damage becomes really hard," he added.

This article was first published by https://www.abc.net.au
Author: Daniel Ziffer
Last modified onThursday, 22 August 2019 00:11

Leave a comment

Make sure you enter all the required information, indicated by an asterisk (*). HTML code is not allowed.

back to top

News

Major Topics

Helpful Resources

Socialize

About Us