Business banking customers were slugged with $201 million in penalty fees last year, while individuals were forced to cough up almost $1 billion in penalties, new data from the Reserve Bank has revealed.
The RBA started collecting data on penalty fees (typically charged for making a late payment, overdrawing a deposit account or exceeding a credit limit) for the first time this year, in a response to a Senate inquiry on bank fees and charges.
While this means it is difficult to see whether penalty fees are increasing or remaining steady, the RBA data reveals total bank fees paid by businesses increased 8% in 2008, well above the average annual growth rate of 5% recorded in the preceding five years.
The RBA noted faster growth in loan fees and fees associated with bank bill facilities, but despite the big jump in growth in fees, the RBA was comfortable there was no gouging by the banks.
“The growth in fee income in 2008 was less than the growth in the value of both business loans and business deposits, suggesting that it was mainly the result of greater use of banking services,” the RBA said in a statement.
On a positive note, merchant service fees – which are charged to merchants for providing credit and debit card transaction services – increased by 6% in 2008, slower than the 8% growth seen in 2007.
Bank fees charged to households increased by 8% to $4.9 billion, although this growth rate was slower than the annual average growth rate of 11% over the previous five years – hardly surprising given the fall in credit card usage and home loan sales during the downturn.
Consumer group Choice hit out at the level of penalty fees incurred by businesses and households and called on the Government to do more to ensure competition in the sector is strengthened.
“These are the figures the banks didn’t want you to see, and they’re much worse than even we expected,” spokesman Christopher Zinn said.
“The growing market dominance of the big four as a result of recent bank mergers means banks have customers over a barrel,” Zinn says. “This is an unacceptable situation.”
But the chief executive of the Australian Bankers’ Association, David Bell, said at least 30% of penalty fees were avoidable and suggested households could slash penalty fees simply by withdrawing money from their own bank’s ATMs, rather than any ATM.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
