THE Australian Consumers Association (ACA) is calling for an investigation into bank fees, some of which it says could be illegal, while banks are charging more and more on credit cards.The ACA's Gordon Renouf said it was not clear whether financial institutions were charging penalties to recoup losses for processing matters, such as late payments or bounced cheques, the ABC reported today.
Mr Renouf said government and regulators had not forced financial institutions to reveal what proportion of the banks' penalty revenue was cost recovery and what was profit, the ABC reported.
He said it was illegal for banks to charge more than it costs to recover losses.
"The fees are imposed because consumers don't comply with their contracts, for example, by having not funds available for a direct debit or overspending on their credit card, or not paying on time," he said.
"You're entitled to charge the cost that has been incurred and not some greater amount to make a profit."
Raking it in. Banks charged households $3.44 billion in fees in 2004, a healthy 12 per cent jump from $3.44 billion in 2003.
A huge proportion of that, or $787 million, was charged on credit cards, up from $607 million in 2003. That was closely followed by $746 million charged on home loans in 2004, up from $679 million in 2003.
The ANZ Bank (anz.ASX:Quote,News) today posted a record $2.81 billion net profit for the year to September 30, 2004, up 20 per cent on the previous year, helped by strong growth in personal lending and bank fees.
ANZ reported mortgage growth of 15 per cent for the 12 months to July 2005. Credit cards continue to perform well with outstandings up 18 per cent.
"Declining credit spreads continue to impact margins, offset by improved non-interest income in the second half," the bank said.
Over the past decade, all big banks have earned a rising proportion of their total income from fees, particularly on credit products.
The major reason for this has been the slower growth in interest income due to declining margins, according to the Reserve Bank of Australia.
However, the increases in bank fees and other non-interest income earned by banks has not been sufficient to offset the decline in interest margins from housesholds, the central bank said earlier this month.
Fortunatley for consumers, recent credit card reform has also resulted in interchange fees charged by Bankcard, MasterCard and Visa card schemes being reduced to around a little over half of their previous level, the central bank said earlier this month.
The Reserve Bank said competition by credit card providers will likely ensure that the new, lower fees will flow through to merchants and ultimately reflect in the prices that consumers pay.
(source: The Advertiser, Adelaide, Australia)
