Recent increases in consumer-credit interest rates and increases in bank charges are hitting the people least able to afford it and people who are least able to rearrange their affairs so that they can reduce their exposure to the extra imposts. This week (ends Jan 7) the recently privatised State Bank of NSW fell in to line with other banks with transaction charges for people whose accounts fall below $500. Further, it offered no exemptions for low-income groups.
The four major banks and now the State Bank (which in NSW and the ACT rates with them in customer accessibility) have a hotchpotch of fees which depend on numbers of transaction a month, the balance in the account and whether the transactions are electronic or over the counter. But there is a consistent pattern: fees are reduced if there is $500 in the account and fees are lower for electronic than personal transactions. It is true that this reflects the costs to the banks of running those accounts, but that just happens to coincide with hitting those least able to bear or defray the cost. Welfare recipients, for example, invariably get their money paid directly into an account, so they have to have bank accounts. Welfare recipients are usually not the sort of people who can afford to have $500 constantly in the bank to avoid the fees banks have started to charge for maintaining such and account _ between $2 and $2.50 a month. So it seems that welfare recipients are having a compulsory levy of up to 2 per cent taken from their pensions. It seems only a little, but for most pensioners it is the equivalent of the Medicare charge for income earners.
If there were an equivalent pay cut for ACTU members there would be strikes and an outcry until the Government struck some sort of deal. Governments have found this method of payment better because it is cheaper and reduces chances or theft and fraud. It seems just as the Government acts to save some money the banks hop in on the action. There is a good case for arguing that because the Government pays this way it is generating custom for the bank and the banks in turn have some moral obligation not to be predatory about it. True, electronic transactions are cheaper for banks. But once again it is the elderly who find them harder to use and usually the elderly who have low incomes.
People with little money have less bargaining power to get special deals from banks. Indeed, it seems banks regard customers with small turnover as a nuisance to be actively discouraged. Informed opinion in the industry suggests that we can only expect the trend to continue. This is the down side of privatisation and deregulation. It may well be that one or other of the banks will engage in a market response to attract the social-welfare recipient market, but that is unlikely. The banks have obtained considerable advantages from deregulation (some of which they have recklessly squandered), they therefore have a social obligation back to the community. It that does not come voluntarily, perhaps the Government might need to reassess the regulatory position. The Minister for Consumer Affairs, Janette McHugh, has called for meetings with the banks and consumers.
She should make it clear that if the banks are not going to have a social conscience the Commonwealth has constitutional power over them to force the issue. Alternatively, the Commonwealth has considerable financial power with the billions of dollars it moves in welfare and other transfer payments which, with a little imagination, could be used to make the banks treat lower-income customers better. The Government should not tolerate a situation where perhaps as much as $50 million a year is transferred from the welfare sector to the banking sector.