Business customers 'gouged' on fees
The total value of bank fees paid in Australia rose 4.3 per cent to $11.4 billion last year, the Reserve Bank said on Thursday.
While charges paid by households fell slightly, to $4.1 billion, this was more than offset by strong growth in fees from business.
Fee income from business jumped by 7 per cent to $7.3 billion, and has surged by a quarter since 2009. Over the same period, the value of outstanding business loans increased by just 2.7 per cent, figures from the Reserve show.
The increase in fees paid by business, which the Reserve described as "substantial", was attacked by the Australian Chamber of Commerce and Industry. The peak body's chief economist, Greg Evans, said banks appeared to have increased their fees well beyond the underlying cost of delivering services to businesses, and they were using business customers to subsidise lower fees for households.
"Account service fees and loan review fees are paid with no benefit to customers and they are becoming a lucrative and growing revenue source for these institutions," Mr Evans said.
"Ultimately competitive pressure should be the answer but in its absence lenders are exerting significant pricing power."
The Australian Bankers' Association said fee revenue from business had risen over the past year because of a rise in lending, especially to larger companies.
Banks' fees from business customers had increased sharply after the financial crisis because companies had turned to banks as a source of finance, it added.
It also highlighted the fall in household bank fees, which have dropped in each of the past three years to $4.1 billion in 2012. Last year the pace of the reduction slowed, with a fall of 0.3 per cent.
Credit cards were biggest source of fee income from households, with consumers spending $1.3 billion on credit card fees.
Home loan and deposit fees fell, while there was solid growth in "exception" fees - which can be levied on overdrawn accounts.
Frequently Asked Questions about this Article…
The Reserve Bank said total bank fees paid in Australia rose 4.3% to $11.4 billion last year.
Fee income from business customers jumped 7% to $7.3 billion last year and has surged by about a quarter (25%) since 2009, while the value of outstanding business loans rose only 2.7% over the same period.
The Australian Chamber of Commerce and Industry, through chief economist Greg Evans, argued banks appear to have raised fees well beyond the underlying cost of providing services, using business customers to subsidise lower household fees and exerting significant pricing power where competitive pressure is limited.
The Australian Bankers' Association said business fee revenue rose because lending increased, particularly to larger companies, and that fees from business customers grew sharply after the financial crisis as companies turned to banks for finance.
Household bank fees fell slightly to $4.1 billion, declining each year for three years to 2012 with the pace slowing to a 0.3% fall last year. Credit card fees were the largest household source at $1.3 billion, while home loan and deposit fees declined and "exception" fees (such as for overdrawn accounts) saw solid growth.
The article highlighted account service fees and loan review fees (called out by the Chamber as lucrative with no customer benefit) and also noted growth in "exception" fees, which can be charged on overdrawn accounts.
The article referenced last year's figures, changes over the past three years, and a comparison to 2009 — noting business fee income rose about 25% since 2009 while outstanding business loans increased only 2.7% in that same period.
The Chamber's chief economist said that, in the absence of competitive pressure, lenders are using significant pricing power to raise fees — implying competition should check fee increases but may not be doing so effectively.
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