An
interesting stoush is brewing between the Australian Consumers
Association and the Australian Bankers Association. The argument was
instigated by the ACA, which raised the point that the level of fees
being charged in certain instances (for example, where a customer
writes a cheque which bounces) may be illegal. The ACA argued that
banks are only permitted to charge fees commensurate with the cost
incurred by the bank, and not use fees as a profit spinner. In
response, a spokesperson for the ABA noted that “banks meet their legal
obligations and fully disclose their fees.” As a solicitor who has
worked at a top-tier law firm (which is employed by several leading
banks), and also a company director, I tend to agree with the points
being made by the Consumers Association. Here’s why…

Bounce baby bounce…
A
pertinent example of banks using fees as profit centres involves the
bouncing of a direct debit (this is when a customer schedules a direct
debit but does not have sufficient funds to cover the direct debit when
that payment is due to be made). Many customers of the business in
which I am associated pay by a scheduled direct debit arrangement. Very
occasionally, a customer will not have enough funds to cover the direct
debit payment. In this situation, their bank will attempt to make the
transfer (via electronic means). If there are insufficient funds in the
customer’s account, the following day the bank will reclaim the money
from the merchant’s account.

Both actions are electronic and
presumably cost the large banks around $1. However, rather than charge
the customer $1 or even $5, the large banks will charge the bouncee a
staggering $50 fee. That equates to a mark-up of approximately 5000%.
There aren’t too many business that are able to charge those sort of
margins. There are even fewer who charge those margins but claim to not
make any money from the service.

Not worth the paper it is written on…
Direct
debits aren’t the only area where banks are pillaging their defenceless
customers. I was made aware of an instance recently where a business
which has a merchant facility with one of the large banks decided to
close its account – Which Bank?, well, that can be left to your
imagination. The merchant, sick of paying extortionate merchant fees,
decided to change banks to a rival.

The contract between
merchant and the bank made no reference to any fees being applicable
upon the cancellation of the facility. However, this did not stop the
bank from imposing a $100 cancellation fee. When an employee of the
merchant questioned the bank, the bank responded by claiming that the
contract entered into between the parties permitted the bank to charge
any fees they liked.

However, upon legal review of the contract,
no provision was made for termination fee, nor was any clause present
which allowed the bank to simply impose any fee. The bank simply
charged a fee because they could, with no underlying legal basis for
doing so. The bank was well aware that no customer is going to spend
thousands of dollars on legal fees contesting a $100 charge.

Read more on the site here.