ANZ, Commonwealth Bank, Westpac, Bendigo and Adelaide Bank refund customers almost $25 million

Four major Australian banks are refunding customers almost $25,000,000, following an investigation by the Australian Securities and Investments Commission (ASIC).

The investigation looked into the practices of the Australia and New Zealand Banking Group (ANZ), Bendigo and Adelaide Bank (Bendigo Bank), Commonwealth Bank of Australia (CBA) — including its Bankwest division — and Westpac Banking Corporation — including its regional retail brands St George, BankSA and Bank of Melbourne.

ASIC found that customers — primarily Indigenous customers — were not being transferred to low-fee accounts when eligible.

“The Banking Code of Practice acknowledges that customers who receive government concession payments and qualify for a Commonwealth Seniors Health Card, Health Care Card or Pensioner Concession Card are entitled to access appropriate accounts,” ASIC said.

“In recognition of the limited financial resources available to these customers — typically known as ‘low-income customers’ — they are eligible for basic, no or low-fee accounts.

“Unfortunately, large numbers of these customers remain in high-fee transaction accounts that charge dishonour, overdraw, assisted withdrawal and/or account keeping fees (high-fee accounts), resulting in their limited funds being eroded.”

While ASIC’s investigation focused primarily on the harm to First Nations customers, it found information relevant to all low-income customers across the country.

It then requested that banks “remediate customers for past fee harm”, resulting in the refund of $24,600,000 to customers.

“ASIC found more than 150,000 low-income customers in the Indigenous pilot locations — including ABSTUDY customers — were in high-fee accounts, despite being eligible for low-fee accounts,” ASIC said.

“Over 12 months, low-income customers who were eligible for low-fee accounts were charged $6,000,000 in fees.

“These were predominantly overdraw and dishonour fees.”

Ineffective processes

ASIC found the banks included in the investigation had processes for identifying low-income customers likely to be eligible for a low-fee account, but were ineffective at migrating customers to these accounts.

“Successful migration rates were as low as 0.5 per cent,” ASIC said.

Processes were largely opt-in, and many required customers to provide proof of concession cards even though they had already identified these customers are receiving concession payments.

ASIC has encouraged banks to change this so customers can choose to opt out of low-fee accounts instead, which the banks have committed to.

More than 9200 customers in Indigenous pilot locations have now been migrated to low-fee accounts and at least 6350 ABSTUDY customers have been migrated to low-fee accounts.

More than 200,000 customers nationwide have been migrated to low-fee accounts, and letters have been sent to almost 1,500,000 customers advising them of eligibility for a low-fee bank account.

The banks involved have also committed to expanding eligibility for low-fee accounts, creating new lower-fee products, and improved communication with and specialised services for First Nations customers — such as the establishment and increased resourcing of Indigenous call lines and face-to-face outreach programs.

“The project’s findings show that banks can efficiently identify low-income customers and implement measures to reduce the risk of their limited funds being eroded by high fees,” ASIC said.

“Other banks should take similar steps to identify customers who could benefit from low-fee accounts and implement processes to move customers on low incomes to accounts that better meet their needs.”