The Sunday Age has jumped on board the movement against banks’ extortionate and illegal “penalty” fees, an issue that was first raised by Crikey way back in 2005 and more recently has been pursued by Michael Pascoe.
The Sunday Age’s investigative reporter, Bill Birnbauer, reported yesterday that a Law Council of Australia study has found that:
Some fees banks charge their customers for breaches — such as late payments and overspending set account limits — are as much as 92 times the actual cost of processing them.
Family First Senator, Steve Fielding, has introduced a Bill into Parliament which seeks to prevent banks from charging penalty fees which are not commensurate with the loss suffered. The common law already says that such penalty fees are illegal. Problem is, the banks don’t much care for the law, they have the far more important tasks at hand, such as ripping billions of dollars from pensioners.
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The banks of course, are not taking the assault on their ill-gotten lucre lying down. As Birnbauer noted, the Australian Bankers’ Association boss and apparently part-time comedian, David Bell, claimed that there is no evidence that banks even charge illegal fees and that it is incorrect to label all fees as penalties. Bell stated that:
For example, if I try to take more money out of my account than I have in it, I’m asking my bank to financially accommodate me…If the bank does, we have an agreement. Wouldn’t it be reasonable to expect to pay a fee for this loan?
The small problem with the example specified by Bell is that users don’t actually ask their bank to overdraw their debit or credit account. For example, if you have $40 left on your credit card balance, and purchase an item for $41, the bank will allow the transaction (even though there isn’t enough money in the account to cover the debit). At the time of the transaction, the user has no idea that they are over-drawing their account by $1. If they were made aware, they would presumably not complete the purchase or simply use another facility. Of course, the bank does not tell the user this. Instead, the bank allows the transaction and slaps a $30 to $50 “overdrawn” charge on the user.
If the banks had any semblance of ethics or even a vague consideration for the law, they would either:
- Not allow the transaction to proceed, or
- Allow the transaction to go ahead but only charge the consumer a commercial rate interest on the money “borrowed” (in this case, of around 2 cents). Instead, the bank secretly processes the transaction and charges a fee which bears no resemblance to their cost.
There are few enterprises in Australia that are allowed to operate such a grossly criminal regime. The actions of banks, in automatically debiting fees which are clearly not permitted under the law of contract are tantamount to theft. And the victims of this massive swindle are every Australian with a bank account or credit card.