Britain's Fee Ruling Puts Banks On Notice

Sydney Morning Herald

Friday April 7, 2006

Kirsty Needham

A RULING in Britain that credit card late payment fees are illegally set too high, and that many other bank fees should also be cut, has bolstered calls for an investigation into bank fees in Australia.

The share price of British banks slumped after the Office of Fair Trading ruled the industry charged unlawful penalty fees in excess of #300 million ($720 million) a year.

Credit card late payment and over-limit fees will be halved in Britain from the end of next month, and must be below #12 ($28.8), which the regulator said was all that banks needed to recover their administrative costs.

Banks have been told to instead help customers by sending email or text message warnings before they become overdrawn.

The chairwoman of the Consumers Federation of Australia, Catherine Wolthuizen, said the developments in Britain were being watched closely.

National unfair contract legislation, the basis for the British decision, is being drafted in Australia to cover credit cards.

"Penalty fees on bank accounts would be a prime candidate for some action under that legislation," Ms Wolthuizen said.

But the director of the Australian Bankers Association, Ian Gilbert, said Britain was "imposing a form of price control" on banks.

The association's chief executive, David Bell, added: "We would be concerned if that sort of thinking permeated in Australia."

A Victorian Government review of the credit industry last month proposed giving customers more power to dispute unfair fees.

Amid intense competition to offer low interest rates, banks are relying more heavily on fee income to boost profits.

Credit card late payment fees have reached $35. The average fee for exceeding a credit card limit is $29.

The Australian Consumers Association said this type of fee did not exist five years ago. Its finance policy officer, Nick Coates, said some banks even charged $2 for a cancelled ATM transaction and billed customers if they entered the wrong PIN number.

© 2006 Sydney Morning Herald

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