Banks like to say
they listen to customers a lot more these days.
If you believe the
advertising across print, broadcast and social media, banks are cosy and caring
members of our families.
Massive advertising
and marketing budgets have been stumped up in in recent years to tweak images
and to show that banks understand the challenges that both personal and
business borrowers face.
For example, ANZ - a
target of the latest class action announced today - proudly declares "we
live in your world" .
No one wants to see
an unprofitable bank, and that of course is unlikely with Australia's biggest
bank, the Commonwealth, tipped to reveal a full year profit of around $8.7
billion on Wednesday.
But is it fair,
lawful, moral or sustainable for banks to continue charging late fees of up to
$35 when the recovery cost to the bank is estimated to be about 50 cents?
It's a long running
argument that goes to the balance of personal responsibility for credit card
holders and how far banks will go to recover whatever they can.
However, some
messages from banks over the years are more mixed and potentially conflicting
than others.
Back in 2007, I
witnessed a rare event when the ANZ's chief executive at the time, John
McFarlane - a straight taking, folk singing Scotsman - admitted penalty fees
were probably unsustainable.
Participants at the
business lunch were surprised to hear a Big Four banking boss suggest he was
making a little too much money from consumers.
At the time, the ANZ
and the other major banks were under fire for allegedy unfair fees and facing
class actions back by litigation funders like IMF Australia.
"It's interesting that the people who are the
poorest pay the highest cost for borrowings and from money lenders and other
forms of unregulated lenders. They also pay the most for their banking, you
know, they're the least literate financially, and therefore they're at least
capable of managing their accounts."
And Mr McFarlane even
relayed a moment of personal embarrassment, that most would find unusual for a
top banker on a multi million dollar salary, when his credit card was
dishonoured at a checkout:
"I have to tell
you it's a hell of embarrassing when you're a big shopper and you have to hand
everything back at the till because they won't approve your credit card."
But more importantly,
Mr McFarlane conceded that some penalty fees are not worth chasing,
particularly with people who have limited or no ability to pay.
"Eventually they
build up a negative balance, and all you do is write it off, so you never
collect it anyway. So what is the point of upsetting everybody by charging it,
when you're actually, on balance, not going to collect it."
Seven years have
passed since John McFarlane signaled he was in touch with the penalty fees
issue and the serious damage class actions can inflict on the carefully crafted
images of banks.
Some banks have reviewed
the level of penalty and dishonour fees but most still play hard in pursuing
them and chief executives continue to push for record profit after record
profit.
This has become more
intense since the global financial crisis where banks continue to finely
balance the interests of shareholders, who want greater dividends, and
customers who know how to shop around.
The banks targetted
by the Maurice Blackburn class action in the NSW Supreme Court will of course
fight tooth and nail, especially given the partial victory inflicted on the ANZ
back in 2010.
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