Watchdog to scrutinise bank charges
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Bank charges, which accounted for R51-billion of South African banks’ revenue last year, will now be scrutinised by an independent consumer watchdog.
The government insists banks must fund this body and the Treasury is in talks with the Banking Association of South Africa.
Once the consumer body is established, the Treasury will “help and prompt” it, said Treasury deputy director general Ismail Momoniat.
The creation of an independent consumer watchdog was discussed at a meeting between Finance Minister Pravin Gordhan and the banks in June, said Momoniat.
Banks maintain that their charges are in line with their operating expenses.
A leading economist, who was on the Competition Commission’s 2008 bank inquiry panel, supported the move to create a watchdog body, saying little had changed in the banking sector since the release of the commission’s report.
Apart from accusations that local bank charges were comparatively higher, banks have also been accused of not explaining fees to consumers, who find the charges too complicated to query.
Gauteng firm Horwath Forensics conducted a study for Finweek magazine on bank charges at the four biggest banks: Absa, FNB, Standard Bank and Nedbank.
Banks have different pricing options, which include “pay as you transact”, where there is a cost for every transaction.
The alternative is a package where the customer pays a fixed monthly fee for a specific amount of transactions, while on some packages customers pay for individual transactions after the limited transactions have been reached.
Horwath Forensics’ study was based on a family with two children, two current accounts, a R1,8-million bond and two car loans of R200 000 each. In its findings, Standard Bank came in as the most expensive bank with R735 in bank charges on the “pay as you transact” option. For the package option, the monthly fee was R364.
Absa, which did not raise its fees this year, came in at R693 on “pay as you transact” and R345 on a package option.
Nedbank charges rose by 15 percent from 2009, to R536. On Nedbank’s package option, the charges increased by 16 percent to R297.
FNB had the cheapest rates. On its “pay as you transact” options, the charges were R433 and R282 on the package option.
Financial website Justmoney runs regular polls, asking its users their views on bank charges.
In one recent survey, 42 percent of users said their individual bank charges were more than R200. Only 18 percent said they checked their charges while the majority said they were too complicated.
Momoniat said the Treasury hoped the funding model for an independent consumer-driven agency to monitor bank charges would be in place by year-end.
He said the banks should fund the initiative. “We need to develop more expertise and find effective ways to ensure that banks are not taking advantage of the monopolistic nature of the industry.”
He said the issue of bank charges was a “difficult area, not unique to South Africa”.
“The government can, and should, be doing more; we can force greater disclosure.”
Dr Penelope Hawkins, who advised the Competition Commission’s banking inquiry, said little had changed since the commission’s hearings.
Hawkins - a director at economic policy and research firm Feasibility - was also a member of a task team that prepared a report for the Treasury and the Reserve Bank.
She said during the commission hearings there had been immense focus on fees related to banking transactions.
Some of the outcomes included
Absa’s decision to reduce the fee for dishonoured debits to R5 on some accounts. This is the fee the banks charge when there are insufficient funds in an account for a debit order to be processed.
All the big banks have kept this fee at about R10 for accounts aimed at lower-income clients.
Hawkins said there was “clearly a gap” between what transactions cost the bank and the charges the consumer paid. The pressing concern was the lack of a consumer body empowered to research and deal with bank charges, she said.
”The level of bank charges, by the (banking) ombudsman’s own admission, had been ‘explicitly excluded’ from the ombudsman’s mandate. They can only rule on matters related to the application of fees – whether they have been appropriately applied. The average consumer does not know where to go to when they have a complaint around bank charges.”
Hawkins said bank income was divided into two areas: interest income and non-interest income. Last year the regulator of the banks, the banks supervision repartment in the Reserve Bank, said in its annual report that non-interest income of the banks in aggregate exceeded their interest income.
Former banker Ray Brown says it costs banks a cent for an electronic statement and less than R1 for a withdrawal at an ATM. - Cape Argus