An ASIC review has found that some individuals in high-fee transaction accounts, including First Nations people, are paying up to $3000 in overdraw fees over a year. Banks need to do more to assist such customers to move into low-fee accounts.
The Better Banking for Indigenous Consumers Project reviewed target market determinations (TMDs) for both high-fee and low-fee ‘basic’ accounts offered by some of Australia’s major and regional banks. ASIC issued notices to those banks requiring data on fees charged to consumers in locations with higher-than-average proportions of Indigenous people and for customers in receipt of AbStudy payments.
The review found that many Indigenous consumers identified in the data were in high fee accounts paying high fees, despite being eligible for a low-fee ‘basic’ account.
ASIC Commissioner Danielle Press said, ‘It’s unacceptable that we have found many consumers continuing to experience harm through transaction account fees, when banks know these people could be in low-fee accounts.’
‘Current processes to transfer eligible customers to low-fee accounts are overwhelmingly ineffective. We have raised these issues with the banks included in the review. ASIC wants to see action taken swiftly to change these customers to a low-fee option.’
Concerningly, the review found that banks were aware of high numbers of customers eligible for low-fee accounts but, the majority of banks’ processes to transfer these eligible customers to low-fee accounts were ineffective. This figure differed between institutions, with the majority of banks having migration rates as low as between 0.5% to 3%. One of the more effective processes only saw a 47% migration rate.
Additionally, the review revealed that:
over 110,000 consumers in identified locations with higher-than-average proportions of First Nations people and in receipt of AbStudy payments are in high-fee accounts, despite being eligible for a low-fee account,
these consumers paid over $6 million in fees over a twelve-month period, which would have been avoided were they in a low-fee account, and
the most prevalent fee was an ‘overdraw’ fee, which is not charged on a low-fee account.
Since ASIC’s review, one bank has taken positive steps to improve its TMDs including by removing overdraw, dishonour, account maintenance and withdrawal fees from its transaction accounts for all customers. However, there is further work to be done.
‘We are asking banks when they will migrate eligible customers to low-fee accounts, and whether they will remediate impacted customers. We are also asking what changes will be made to ensure tailored Indigenous services are effective. We will be monitoring these issues to ensure changes are made and will prepare a report on this project later in 2023,’ added Ms Press.
ASIC has written to the banks with our expectations and key findings. This includes outlining reasons for banks to:
migrate all eligible transaction account customers in Indigenous Pilot locations and those on AbStudy to low-fee accounts on an ‘opt-out’ basis,
ensure that fees are removed for new and existing customers, when products are altered and fee structures changed to remove particular fees,
review and improve TMDs and account opening procedures in line with Design and Distribution Obligations to prevent future harm of this type to all prospective customers,
remediate impacted customers, and
make procedural changes to tailored Indigenous services to better meet their commitments to their Indigenous customers.
ASIC is committed to supporting positive financial outcomes for Indigenous Consumers.
This project has been led by ASIC’s Indigenous Outreach Program and aligns with the outcomes in ASIC’s Indigenous Financial Services Framework, and the commitments set out in ASIC’s Stretch Reconciliation Action Plan.