4 Access to banking services

Before moving away from consumers’ interactions with banks, I think it necessary to say something about access to banking services.

It is unsurprising that large entities, carrying on their businesses in all parts of Australia, apply the same policies and procedures whenever they can. But, as the Commission’s inquiries showed, not all Australians can always resort to those standard policies and procedures. Not all Australians have the same access to telephone or internet banking.[1] Not all Australians can ‘step into the nearest branch’ to sort out some issue that has emerged. Not all Australians have English as a first language or are as adept in using the English language as others. Not all Australians can easily produce standard identification records. Not all Australians need, or benefit from, ‘standard offerings’ like informal overdrafts.

For some Australians, these characteristics arise from living in a regional or remote location. As I said in the Interim Report, at 30 June 2017, about 28% of the Australian population lived in regional or remote areas. This is nearly 7 million people. At the same time, only 4% of all branches of ADIs and 2% of ATMs were located in areas classified as remote or very remote. The banks’ branch networks have been shrinking for some years. The banks have fewer face‑to‑face points of presence.[2] But, as will be apparent from what I have said, it is not only people who live regionally or remotely who will experience the types of issues that I have described.

Four steps should be taken to improve access to banking services. None was seriously opposed in the submissions provided to the Commission.

The first relates to the way in which the 2019 Banking Code deals with customers requiring particular assistance.

Chapter 14 of the 2019 Banking Code is entitled ‘Taking extra care with customers who may be vulnerable’. One clause in that chapter (clause 40) provides that: ‘If you tell us about your personal or financial circumstance, we will work with you to identify a suitable way for you to access and undertake your banking’. But the general tenor of this and other provisions of the chapter is that they are directed only to those who are vulnerable and they will apply only upon the customer telling the bank of the circumstances that make the customer vulnerable.

It is not only the vulnerable who need consideration. Those identified above (including those who live in remote or isolated areas, who are not adept in using English, who cannot readily produce standard identification documents, and who neither need nor benefit from products such as informal overdrafts) also require consideration.

I consider that provision should be made in the 2019 Banking Code to require banks to work with customers who live in remote areas, or who are not adept in using English, to identify a suitable way for those customers to access and undertake their banking. Some of those to whom these provisions would apply will identify as Aboriginal or Torres Strait Islander peoples, but the relevant criteria are remoteness and language, not identification.

Second, as explained during the fourth and fifth rounds of the Commission’s hearings, the Australian Transaction Reports and Analysis Centre (AUSTRAC) has published guidance intended to overcome the difficulties that are sometimes faced by Aboriginal and Torres Strait Islander people in assembling documentary proof of identity (AUSTRAC Guidance).[3] The AUSTRAC Guidance recognises that some Aboriginal and Torres Strait Islander customers may not have identification documents that reporting entities most commonly use to establish and verify the identity of their customers, or that the information contained in the documents may no longer be accurate or up to date. As a result, these people may face barriers in accessing financial services.[4]

During the fourth round of hearings, Ms Lynda Edwards from Financial Counselling Australia and Mr Nathan Boyle from ASIC gave evidence about the implementation of the AUSTRAC Guidance. Ms Edwards said that the processes outlined in the AUSTRAC Guidance are ‘not always … used’ by financial services entities.[5] Mr Boyle said that the AUSTRAC Guidance has been ‘taken up by financial services institutions at the … head office level’, but that application of the Guidance ‘hasn’t filtered down to the customer-facing staff or to the telephone staff’.[6] As a result, Mr Boyle said that he was ‘still not seeing a real reduction in the difficulties that people are having identifying themselves on the ground’.[7]

In my view, these problems may be addressed at least in part by amending the 2019 Banking Code to provide that, if a customer is having difficulty proving his or her identity, and tells the bank that he or she identifies as an Aboriginal or Torres Strait Islander person, the bank will follow the AUSTRAC Guidance.

Third, the 2019 Banking Code should be amended to record that banks will not allow informal overdrafts on basic accounts without prior express agreement with the customer. The 2019 Banking Code refers to ‘basic, low or no fee accounts’.[8] I use the expression ‘basic account’ to embrace all three types of accounts.

I explained in the Interim Report that a ‘basic account’ is a bank account that provides the account holder with essential banking services at a lower cost than other forms of account.[9] Those who are on a low income, especially those in receipt of certain government benefits or holding government concession cards, may find that a ‘basic account’ suits their needs better than other forms of account.[10]

As I also explained in the Interim Report, an informal overdraft will arise when a bank allows a customer to withdraw more than the amount standing to the credit of the customer’s account.[11] The bank may allow overdrawing without any prior agreement with the customer.[12] If the bank does meet the customer’s request to withdraw an amount larger than the balance standing to the credit of the account, the bank will charge the customer a fee for lending the customer the amount of the informal overdraft.[13]

I have two principal concerns with informal overdrafts, particularly on basic accounts. The first is that, as I said in the Interim Report, the fee charged when an informal overdraft is granted may be small but, with repeated overdrawing, these fees can soon mount up.[14] The second is that the evidence received during the fourth round of hearings indicated that some customers did not know that they had been offered, and had made use of, an informal overdraft.[15] Some customers knew nothing more than that their request to withdraw money had been met.

In my view, these characteristics suggest that the ABA should amend the Banking Code to provide that informal overdrafts should not be offered on basic accounts unless the customer has expressly sought, and been granted, that facility. In those circumstances, a customer will have actively turned their mind to whether they wish to have the facility, and they will be aware of the potential consequences of using the facility.

Fourth, the ABA should amend the Banking Code to provide that banks will not charge dishonour fees on basic accounts. In their submissions in response to the Interim Report, each of the major banks advised that they had adopted this position.[16] Other banks, to the extent that they have not followed the lead of the major banks, should do so, and also discontinue charging dishonour fees on basic accounts.

Before leaving this topic, I make two further observations.

The first is that clause 181 of the 2019 Banking Code will oblige banks to comply with the Code of Operation: Recovery of Debts from Department of Human Services Income Support Payments or Department of Veterans’ Affairs Payments. The Code of Operation provides for what has come to be known as the 90% arrangement, which limits the amount that a bank may take from government benefits in reduction of a debt owed to the bank. Restricting informal overdraft arrangements to customers who actively seek out such an arrangement would very likely go some way to reducing the numbers of customers on benefits who owe significant debts to banks, and would very likely go some way to reducing the amounts owed by individual customers.

The second observation is about the importance of continuing to develop innovative solutions to address barriers to access.

One example of this, which I discussed in the Interim Report, is CBA’s Indigenous Customer Assistance Line (ICAL).[17] ICAL provides support for geographically isolated Aboriginal and Torres Strait Islander customers in 90 remote communities by providing free balance inquiries, replacement cards, access to funds, and other, more general, support.[18] ICAL uses a special identification process tailored to the customers who use the service.[19] Financial Counselling Australia (FCA) told the Commission that the ICAL service is ‘very helpful’ for both Aboriginal and Torres Strait Islander people, and for financial capability workers working with that population, because the dedicated staff ‘are trained to understand the specific issues facing them and respond appropriately to issues such as remoteness and identification’.[20]

Westpac is now in the process of establishing such a service,[21] and ANZ has indicated that it is willing to do so.[22]

A telephone service, no matter its efficacy, is not capable of solving all of the issues impeding access to banking services, whether by Aboriginal and Torres Strait Islander people or by others living in remote areas. It could only ever form part of a range of initiatives directed towards improving access. But the provision of this service has been identified as helpful by those working with Aboriginal and Torres Strait Islander communities,[23] and I strongly encourage the development of such services.

[1]See generally Transcript, Shayne Elliott, 28 November 2018, 7285.

[2]FSRC, Interim Report, vol 1, 257.

[3]See AUSTRAC, Aboriginal and/or Torres Strait Islander People (13December 2018) AUSTRAC <www.austrac.gov.au/aboriginal-andor-torres-strait-islander-people>.

[4]AUSTRAC, Part B of an AML/CTF Program (Customer Due Diligence Procedures) (13December 2018) AUSTRAC <www.austrac.gov.au/part-b-amlctf-program-customer-due-diligence-procedures>.

[5]Transcript, Lynda Edwards, 3 July 2018, 3726.

[6]Transcript, Nathan Boyle, 3 July 2018, 3727.

[7]Transcript, Nathan Boyle, 3 July 2018, 3727.

[8]See, eg, 2019 Banking Code, Ch 16.

[9]FSRC, Interim Report, vol 1, 260.

[10]FSRC, Interim Report, vol 1, 260; see also 2019 Banking Code, Ch 16.

[11]FSRC, Interim Report, vol 1, 260.

[12]FSRC, Interim Report, vol 1, 260.

[13]FSRC, Interim Report, vol 1, 260.

[14]FSRC, Interim Report, vol 1, 260.

[15]Transcript, Nathan Boyle, 3 July 2018, 3721.

[16]ANZ, Interim Report Submission, 5 [24]–[26]; CBA, Interim Report Submission, 25 [125], 26 [137]; NAB, Interim Report Submission, 37 [144]; Westpac, Interim Report Submission, 50 [242].

[17]FSRC, Interim Report, vol1, 258.

[18]FSRC, Interim Report, vol1, 258.

[19]FSRC, Interim Report, vol1, 258.

[20]FCA, Interim Report Submission, 18 [77].

[21]Westpac, Interim Report Submission, 47–8 [225].

[22]ANZ, Interim Report Submission, 4 [20]; cf ANZ, Module 4 Policy Submission, 18 [85]; Transcript, Shayne Elliott, 28 November 2018, 7290.

[23]Legal Aid NSW, Module 4 Policy Submission, 16; CALC, Module 4 Policy Submission, 21 [77]–[79].