There has been a major debate in Australia this year about bank 'exception fees', with some stakeholders stating that they are too high and in some cases applied unfairly. ANZ is taking market-leading steps to reduce the impact of these fees on low-income earners.
We know that most customers accept fees, provided the fees are clear and for a product or service they value.
It follows then that customers can become disgruntled if they believe fees are 'hidden', or disproportionate to the value they receive.
Exception fees (also referred to as penalty or default fees) are charged by banks when a customer does not have enough funds in their account for a payment or withdrawal, when a credit card limit is exceeded or when a customer is late with a payment to their account.
Consumer advocates argue banks 'profiteer' from these fees, with the greatest impact being felt by customers who are least able to afford them.
It's on the agenda in other countries. In early 2006 the UK Office of Fair Trading issued industry guidance effectively capping default fees on credit cards at £12. Some UK banks have now joined with regulators in a legal action to ask the UK courts to clarify the legal position of overdraft fees.
While there remain some unresolved legal questions about how banks apply these fees, we decided to act now, rather than risk losing touch with our customers. A failure by the banking industry to adequately respond to community concerns might also build the case for inappropriate regulation.
EXCEPTION FEES POLICIES
ANZ has introduced two new consumer fee policies. The ANZ Exception Fees Policy - Consumer Cards and the ANZ Exception Fees Policy - Consumer Transaction Accounts set out public commitments to respond to what we understand to be the most important issues to our customers, including:
Reducing the fees for low-income customers
We reduced to $10, from $35, all exception fees on ANZ Access Basic, our concession account for health care card holders and Centrelink payment recipients. Over 47,000 ANZ customers currently hold this account. We have now extended this reduced fee so it also applies to all credit card accounts held by these customers.Helping customers avoid the fees
While these fees are avoidable, there are steps a bank can and should take to assist all customers to better understand the fees and arrange their finances so they do not incur them in the first place.
Customers have for some time been able to avoid dishonour fees by "turning off" their ability to overdraw their transaction account with electronic transactions. We are now making this same option available on credit card limits as part of the exception fee policies.
We will also continue to provide customers with the option of taking up the 'safety net' of an overdraft on their transaction account and the ability to set up automatic monthly payments to their credit card to avoid accidentally incurring late payment fees.
Communicating effectively
A fee may not always be well understood by our customers just because it appears in product terms and conditions. For the most part a customer does not expect to overdraw their account or go over their credit card limit. They may only become aware of a dishonour fee when it appears on their statement for the first time - which is precisely when information about exception fees would be most helpful.
ANZ's Policy therefore commits us to waiving the first exception fee a customer incurs, provided they contact us. At that point we will discuss with the customer why the fee was charged and options to help the customer avoid the fee in the future. We have also committed to providing this information in writing to all customers who incur an honour fee on their ANZ transaction account.
WHAT'S NEXT?
These changes will not satisfy the concerns of all stakeholders. However we believe we have reached some common ground, in particular by addressing the impact exception fees can have on the most vulnerable customers.
We are also exploring how we can be more proactive in talking to customers about these fees, especially those who are incurring more than the average number of exception fees per year.
