Customers on low incomes, including First Nations customers, will be repaid over A$28m ($18.9m) from ANZ, Bendigo and Adelaide Bank, Commonwealth Bank of Australia (CBA) and Westpac (including its regional retail brands St. George, BankSA and Bank of Melbourne) after a ‘first-of-its-kind’ review from ASIC.

The review, Report 785 Better banking for Indigenous Consumers, revealed that the four Australian banks systemically charged high fees to those customers that could least afford it.

At least two million Australians on low incomes were affected by the high fees, which caused financial distress for many, said ASIC Commissioner Alan Kirkland. “Banks knew that many of these customers on low-incomes were in inappropriate high-fee accounts, and it has taken ASIC’s intervention to force them to act.”

Trouble for remote customers

ASIC looked at data between November 2021 to November 2022, and found:

• Over 150,000 customers had high-fee accounts even though being eligible for low-fee accounts;
• The main harm was from overdraft and dishonor fees; and
• Customers were charged A$6m ($4m) in fees – which would not have happened if they had low-fee accounts.

Complicated bank processes were also found to create barriers for regional and remote consumers.

“Before our review, most banks only provided their customers with difficult ‘opt-in’ processes for switching to low-fee banking options, including forcing some consumers to travel hundreds of kilometres to their nearest bank branch,” Commissioner Kirkland said.

Customer remediation

All of the reviewed banks have committed to customer remediation, and they have now migrated more than 200,000 customers from high-fee to low-fee accounts – which would save them estimated A$10.7m ($7.2m) in future yearly savings. That includes migrating at least 6,350 ABSTUDY customers to low-fee accounts, and over 9,200 customers from Indigenous pilot locations as well. The banks have also informed over 1.5 million customers that they are eligible for a low-fee account.

The banks will also return more than A$28m ($18.9m) in fees to affected customers during the next 12 to 18 months, including A$24.6m ($16.5m) to those receiving ABSTUDY payments and customers in areas with significant First Nations populations.

“Banks knew that many of these customers on low-incomes were in inappropriate high-fee accounts, and it has taken ASIC’s intervention to force them to act.”

ASIC Commissioner Alan Kirkland

Commissioner Kirkland acknowledged the steps the banks had taken so far, but stated that more needs to be done to prevent issues like this.

“This is the second report from ASIC in the last two months that highlights where banks have failed to put customers’ needs at the heart of their operations,” he said. He also pointed out the importance of fair banking services for all, including those in regional or remote areas.

“We expect all banks – not just those we reviewed for this report – to consider these findings, improve the accessibility and distribution of low-fee accounts and commit adequate resourcing to specialist First Nations services.”