Your bank is probably charging twice as much in fees as you think it is. Australian bank customers pay more than double the fees they think they do, a new research study has found.
On average, most Australians think they pay less than $9 a month in transaction and account keeping fees, when the actual amount is closer to $19.
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This equates to around $228 a year per customer.
The big disconnect between the cold reality of bank fees and customers’ perceptions is one of the salient findings of a survey of more than 1000 people commissioned in December by litigation funding firm IMF Bentham.
IMF is the company bankrolling the class actions brought against Australian banks on late fees and over-limit charges.
Fees are okay … within reason
While slightly more than 40 per cent of Australians resent having to pay fees altogether, most recognise that banks have a legitimate right to recoup costs on overdrawn transaction accounts and credit cards that are paid late.
However, most believe that current fee levels are unjustified and are deliberately set above costs incurred by the banks.
In the bank fees test case heard in the Federal Court last year, Justice Gordon found that ANZ had been levying late fees of $35 on credit cardholders when the cost to the bank was as low as 50 cents.
Several banks, including Bankwest and Bendigo Bank, continue to charge late payment fees of $15 or more.
The survey found that most Australians believe that such fees would be defensible if they were set at $3 or less.
Banks should cough up
Although the bank fees test case is subject to an appeal, evidence presented to the Federal Court hearings shows that ANZ imposed fees that far exceeded the cost of providing services to customers.
Whether that practice was legitimate is a matter the court will decide, but more than 92 per cent of survey respondents believe the banks should only recoup the cost of allowing customers to go over their credit card limits or for making late payments.
Almost all survey respondents said banks have an obligation to atone for fee gouging in the past.
“Nearly all Aussies believe that where banks have been found to have charged excessive fees in the past, they should compensate customers,” said James Middleweek, head of IMF’s bank fees class actions.
“Most consumers understand the fairness of paying a reasonable fee when it reflects the bank’s costs. However, they object to being hit with an excessive fee, especially when it appears unlinked to the amount in question or the time period involved.”
So far, National Australia Bank is the only local bank prepared to negotiate a settlement over the bank fees class actions with IMF’s legal representatives Maurice Blackburn.
The deadline for NAB customers to register for compensation under the settlement agreement expired at 4pm on January 27.
Banks recoup lost revenue from small businesses
Since IMF launched legal action against the banks in 2009, many of the banks have slashed the fees they collect from customers for overdrawing their transaction accounts or paying credit cards late.
Because the size of these fees were often punitive, the banks suffered a $650 million reduction in the annual revenue they harvested from personal customers.
That’s a lot of revenue the banks were forced to forego.
However, data published by the Reserve Bank last year shows that they have managed to continue growing fee revenue by slugging small businesses with new charges on lending and boosting merchant service fees.
Banks collected more fees than ever in 2013, according to Reserve Bank data.
“It seems they’ve squeezed small business to recover the revenue they were forced to give up on exception fees on households,” Mr Middleweek said.
“The bottom line is that $8 billion worth of fees were collected from households and small businesses in 2013. It’s still growing.”
The RBA data indicated that the average small business in Australia was paying $2,000 per year, or $166 a month, in bank fees, he said.
Mr Middleweek declined to comment on whether class actions were being planned on behalf of small businesses, but questioned whether the industry was capable of limiting fee increases in the future.
“Does the $8 billion have to inexorably grow each year to keep bank shareholders happy?” he asked.
“That might explain why thousands of customers have signed up to the fee class actions we have under way.”Author: George Lekakis Financial Services Editor