Major banks to cough up millions in refunds to low-income customers following ASIC review

Four Australian banks will cough up nearly $30 million in refund after a review by the Federal corporate watchdog revealed they had charged high fees to customers who could least afford it.

A new report from the Australian Securities and Investments Commission revealed ANZ, Commonwealth Bank, Westpac, as well as mid-tier Bendigo and Adelaide Bank kept at least two million low-income customers in high-fee accounts.

These included many customers relying on Centrelink payments.

The report, to be released on Monday, followed an ASIC review focused on improving financial outcomes for First Nations customers by addressing avoidable bank fees.

“We focused in this project on the banks who were most likely to have First Nations consumers on low incomes trapped in high-fee accounts,” ASIC commissioner Alan Kirkland said.

ASIC said the four banks have committed to moving more than 200,000 customers into low-fee accounts, saving them about $10.7m a year.

The financial institutions will also refund over $28m in fees to these customers over the next 12 to 18 months.

This includes $24.6m to Aboriginal and Torres Strait Islander students and apprentices receiving ABSTUDY payments, and customers in areas with significant First Nations populations.

“At any time ASIC, and the community, expects that the banks will treat their customers fairly,” Mr Kirkland said.

“But that’s particularly important for people on low incomes and for people who are struggling to make ends meet, the last thing they need is to have the very little income that they have being eaten away in unnecessary bank fees.”

Prior to the review, Mr Kirkland said most of the banks only provided their customers with difficult opt-in processes for switching to low-fee options, including forcing some to travel hundreds of kilometres to their nearest bank branch.

He said the implications of ASIC’s latest review applied to all banks across the country.

“We’re expecting all of them to read the report and make improvements to their practices to stop other people being trapped in high-fee accounts that they can’t afford,” Mr Kirkland said.

ASIC in the report provided a range of recommendations to minimise harm to customers, including improving processes for customers opening accounts, and to migrate from high-fee to low-fee accounts.