Just over a month ago a parliamentary in inquiry told the general public what it had long suspect - that Australia's banks were reducing the number of storefronts with a total of 596 towns that once had between one or four major banks by 2023 having no form of bank at all.
According to Rural and Regional Affairs and Transport References Committee's May 2024 Inquiry into bank closures in regional Australia, there were 2,802 banks in 1,126 regional locations across Australia in 1975.
However, just 958 remained open by March 2023 - a cut of 66 per cent of the network or a loss of 1844 banks in 1031 regional towns, cities and coastal communities in just over 45 years.
So why is this happening? It can't solely be as a consequence of the global pandemic or subsequent international or domestic economic pressures.
PAST PREDICTIONS VS PRESENT BEHAVIOUR
Wilson, Therese, "Banks behaving badly" [2004] AltLawJl 88; Alternative Law Journal 294:
The 'deregulation' of banking in Australia during the 1980s has been cited as a major reason for banks pursuing profitable transactions and avoiding what they perceive to be higher risk transactions. Whilst the Wallis lnquiry predicted increased competition in the financial services market that would bring about affordable financial services for all Australians, no such competition has emerged.....
Banks are now trying to attract and retain what they regard as a 'more profitable' group of customers, and have tended to close banks in areas populated by low-income earners. Fees on savings accounts have increased, and tend to be waived only for customers with home loans or investments with the bank, or members of professional associations. Further, very heavy fees are imposed for defaults such as cheques that bounce or overdrawn accounts. Low-income earners are left without the ability to save in any substantial manner, and without access to 'safe credit'. This results in 'financial exclusion' defined as:
lack of access to financial services by individuals or communities due to their geographic location, economic Situation or any other anomalous social condition which prevents people from fully participating in the economic and social structures of mainstream communities.
BEHAVIOURAL CHANGE - FACT OR MYTH?
It's over five years since the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry handed down its final report.
Yet banks are still behaving badly.
In June 2023 the Banking Code Compliance Committee (BCCC) reported:
....a concerning increase in breaches of Part 9 of the Code, which contains the crucial obligations to support customers facing financial difficulty. The almost 40% increase of these breaches is alarming.
In a time marked by escalating inflation and living costs, the imperative for banks to provide support to customers in financial difficulty cannot be overstated. Breaches of these obligations can lead to serious consumer detriment.
Banks reported failing to respond to financial hardship requests, persisting with debt collection activities despite hardship arrangements being in place, and neglecting to follow through on agreed-upon hardship arrangements. Such failings not only breach Code obligations, but they also contribute to a decline in trust and confidence in the industry.
Nine banks (including three major banks) contributed to the 4,415 Part 9 breaches between July 2022 and June 2023.
The poor practices and non-compliance identified in a June 2023 BCCC report fell into three categories:
1. Fees and charges for services no longer provided
Banks continuing to apply fees and charges to accounts of deceased customers despite
being notified of their passing.
2. Failing to act within timeframes
Banks failing to act on requests or instructions within the obligatory 14 days of receiving notifications or information.
3. Lack of respect and compassion
Banks failing to treat representatives and family of deceased customers with the respect and compassion expected in the circumstances.
That report noted:
On the specific issue of fees being charged for services no longer provided on deceased estates, banks committed to rectifying the issues and had plans in place to improve processes.
Some banks were aware of the issues before our inquiry and had already begun comprehensive improvements and remediation programs.
However, given the time since the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry – of which fees for no service, in the context of failure to provide personal financial advice, was a key focus – and the findings of our inquiry, this action has been slow and inconsistent.
Many banks were on notice of the harm caused by fees for no service from ASIC’s investigations into financial advice misconduct in 2015. ASIC reported that, at the end of 2022, banks and financial institutions had provided over $4.7 billion in compensation under remediation programs for loss or detriment due to financial advice misconduct.
Charging fees, including to people known to have died, was a key focus of the second-round hearings on financial advice at the Royal Commission in 2018.
On 2 July 2024 BCCC issued a media release announcing:
The Banking Code Compliance Committee (BCCC) has sanctioned ANZ for not stopping or refunding fees for deceased estates, as well as not responding to representatives of deceased estates within the required timeframe.
Between July 2019 and September 2023, ANZ breached its Code obligations by failing to stop or refund fees charged to deceased estates after customers’ deaths.
ANZ further breached its Code obligations by not responding to instructions or requests for information from representatives of deceased estates within the required 14 days.
Chair of the BCCC, Ian Govey AM, noted the seriousness of the breaches.
“The decision to name ANZ for its non-compliance reflects the seriousness of its Code breaches," Mr Govey said.
“Naming a bank is a sanction that we reserve for the most serious and systemic breaches.
“The significance of the deficiencies in ANZ’s compliance frameworks was deeply concerning. Its non-compliance warranted such a sanction," said Mr Govey.
Despite first identifying the issues in early 2022, ANZ took over a year to implement solutions and then nearly two years to start its customer remediation program, which is still ongoing and expected to be finalised by the end of July 2024.
Mr Govey noted concerns with the remediation efforts from ANZ.
“The remediation did not meet expectations. Once aware of the issues, ANZ did not act with sufficient urgency to remediate the affected customers. It should have done more to address this more quickly,” Mr Govey said.
However, the BCCC acknowledged that ANZ’s remediation included the use of assumptions beneficial to customers, including reimbursing charges that may already have been refunded.
The BCCC also found that another bank had breached obligations by failing to stop or refund certain fees charged to deceased estates after customers’ deaths.
However, in that case, the sanction from the BCCC was to formally warn the bank about its conduct.
In the previous month June 2024 BCCC had announced:
The Banking Code Compliance Committee (BCCC) has sanctioned Westpac Bank for serious and systemic breaches of the Banking Code of Practice (the Banking Code) after it failed to provide adequate support to customers following the closure of its branch in Tennant Creek, Northern Territory.
The BCCC’s investigation revealed that Westpac did not comply with its obligations under the Banking Code and the Australian Banking Association’s (ABA) Branch Closure Protocol when it closed its Tennant Creek branch in September 2022.
The findings show that Westpac needed to do much more to support customers to transition to other ways of banking, engage with the community to promptly address concerns, and provide adequate assistance to customers in remote areas to ensure they could still access essential banking services....
