Tonight, the banks you can bank on and those you can't.
Every single day you have somebody whinging about a bank.
They just go past and the thing is you just feel your hands are tied.
Which banks best and what's happened to the system we once trusted?
Hello and welcome to another Investigator's Special Report.
1991 is shaping up to be the year that consumers took on the banks.
It's too early to say and they won but already the challenge is bringing about change.
Chris Wordsworth has compiled this extensive report on the banking industry despite the
fact that only two banks would talk to us on camera.
Next please.
Give me all your money.
Transaction charge.
Next please.
Well, you don't get the same service as you used to get the days gone by.
Banks.
Yeah.
Hateful.
Old banks or young banks?
No, banks.
Banks?
If I said the word bank what would you say?
Rip-off.
Rip-off.
Rip-off artists.
Oh banks.
Banks.
Oh B-A-N-K-S.
It's a heavy syndrome, the bank syndrome.
At the moment I'd have to say dishonest.
You've got to watch them.
Bad.
No, I actually work for a bank.
Really?
Which one?
Yes, I work for Westpac.
Well, you could trust a bank I think 20 years ago but I don't think I would now.
Mrs Fitzgerald.
I hereby sentence your money to five years hard labor with no parole in a heavily guarded
term deposit.
I object.
It's taken a while but Australia's banks have finally been outgunned.
Not by overseas mega banks, not even by Paul Keating.
Instead they're being brought down to earth by the little guys.
Ordinary everyday Australians.
The people who are or used to be their customers.
And if you don't like it I'll go to another bank.
Which bank?
Every single day you hear somebody whinging about a bank.
They just go past and the thing is you just feel your hands are tied.
Unfortunately for the banks average Australians aren't patting them on the back for developing
one of the most impressive modern banking infrastructures in the world.
Rather their bread and butter customers seem to prefer the way we were.
I used to work in that 50 years ago.
What was it like back then?
The customer was the principal person.
Customer came first?
Yes.
Dear Mrs Greer, how are you?
I'm wonderful thank you Mr Mackenzie.
And what can I do for you?
I'd like to open a new account please.
And how much money do you want to put in your new account?
£20 please Mr Mackenzie.
A sterling sum Mrs Greer.
Mr Mackenzie, you do make me laugh.
Now at 3.5% in two years time your little nest egg will have grown to the very tidy
sum of £21 each shillings and sixpence.
Oh Mr Mackenzie, so much money.
Are you sure it will be safe?
Oh yes, we're not called Rothwell State Bank of the Tri-Continental Pyramid for nothing.
Oh, sounds safe to me.
Tea.
Perhaps the most obvious change has been to the face of banking in Australia.
Yeah?
I'd like to open an account please.
You sure?
Yes please.
Well you've got to fill in one of these.
You can have your savings account packaged, term deposit, high yield, there's peak performance,
safe and sound, end of the rainbow or I've got a pile out of my clever deck account.
You can roll it over, roll it around, shift it sideways, pull it down, whip it in, fix
the mount, fees off, bank card, check account.
Pardon?
No bank or government charges except for withdrawals or the deposits, automatic telemachines, checks,
overdrafts, inward or outward, bouncing, dormant accounts, program, bill payments and the
account keeping.
So which one do you want?
I just want a passbook so I can put money in and take money out.
Hmm, don't think we've got one of them.
Supervisor?
You've got all this choice now but do you understand all the fine print?
Not really, no.
That's too fine, I think.
95% of Australia's adult population have a bank account, able to choose from 20 domestic
and 19 foreign banks, all offering hundreds of different financial products.
We've never had it so good or has it become a case of quantity rather than quality?
I think some confusion is undoubtedly out there in the marketplace because of the rapid
development of new products but this will settle down as the community indicates its
clear preferences.
Mike, I'm going to give you a thousand dollars.
I want you to go into the bank and open an everyday working account.
We put Australia's four mainstream banks through a simple test to see how they conducted one
of their most basic functions.
You'll have your wages paid into the account, you want to withdraw cash on a regular basis
and write checks on a regular basis.
We wanted to discover how they treated the average customer and if bank staff knew what
they were doing, what accounts they recommend and most importantly what these accounts cost.
You want to get the best possible interest rate and find out what you can about fees
and charges, okay?
People just need to know what their own banking profile is in order to make a choice that's
going to suit their needs.
Could it be a bad thing to be taken in by all the hype and just walk up and say, hey,
I want an account with the works?
Certainly because it's the accounts that have the works upon which most of the largest fees
are levied and therefore if you don't need them, you're going to be paying for something
that you don't use.
When I asked her about the amount of free checks that you're supposed to get, it depended
on your minimum monthly balance and I asked her what the minimum monthly balance was and
she didn't know.
To say I had to keep pressing for more information about the accounts.
What sort of things should consumers be looking for in a bank account?
Daily interest on your balance plus payment of interest as frequently as possible and
beside that, one can get checking accounts now that don't actually charge you for the
use of the account.
Now that's the best deal that in fact a consumer can come up with.
Did the teller offer information about fees and charges?
No, I had to ask her that but she did give me some brochures which had the fees and charges
written in them.
She didn't mention any of that and again when I asked her about them, she was a little
bit vague about exactly what they were and how much they'd be.
No, I had to ask her.
Nothing at all?
Nothing at all.
No, she told me what interest rate I'd get for what amount of money I'd put in there
but I had to ask her.
Each of the four major banks failed to voluntarily disclose information on fees and charges and
what of their overall performance?
So have you walked out thinking you were offered a good deal?
No, we.
Five percent interest.
Oh no, I think I'd want to look around a lot more.
A wise move.
Now compare the responses you've seen already to those from our next average customer.
We sent him to one of Australia's smaller banks.
Did the teller offer information about charges and fees?
She did, she gave me this which runs down the line.
So have you walked out of this bank believing you've done a good deal?
I think so, yeah.
It took us three months of research to actually determine what the best recommendation was
for consumers.
Now with the research capability that we have and the amount of time that we can spend on
it, you can see how hard it would be for the average consumer to actually go out and pick
a bank product.
Later in this investigative special report, the results of an independent survey we commissioned
to show you the best and worst working accounts in Australia.
Many of you will want to change banks after you've seen it.
Contributing to this explosion in choice has been a technological revolution.
Over the past decade, Australia has embraced electronic banking more enthusiastically than
any other country in the world.
Around a million electronic transactions are completed every day.
Check all savings accounts.
Savings?
What is the savings on your end?
And your P number.
In fact, Australians are displaying a preference for electronic banking.
In Westpac's case, for instance, over 50% of our transactions are now processed electronically.
Sophisticated ATMs cost up to $70,000 each, so there must be something in it for the banks.
From the bank's point of view, of course, it's probably held down the growth in the
number of staff we might have had to employ if we'd have stuck to a straight manual system.
The big gains to us are productivity.
But at whose expense?
Critics claim consumers have become unpaid employees of the banks.
I went to a conference where one of the keynote speakers said that what technology will do
is allow optimum productivity, and optimum productivity is where the customer does all
the work.
Too many charges for not enough service.
And the service isn't all that great either.
You've got to queue up, haven't you?
What has happened with technology is that it's been used to tolerate or accept higher
levels of staff attrition.
So what, with increased or improved technology, training doesn't have to be as good?
Well, unfortunately, that's the way technology appears to be managed.
Most of the things we now take for granted, like electronic banking, abundant credits,
and high interest deposit accounts, have come about thanks to a federal government decision
back in the early 80s to unshackle the banks.
Irregulation is a word we hear bandied around a lot.
But what does it mean to everyday customers?
In layman's terms, it means the banking industry is more competitive, it's more efficient,
and it's fairer.
People now have access to bank services where, under regulated conditions, funds were rationed
and people couldn't get access to those services.
On the other hand, what has happened is that consumers now have far less service from their
banks.
They're paying a great deal more in fees and charges than they have ever paid before.
I was going through my overdraft the other night and found out it cost me an extra $5,000
during the year with different debits for administration fees and merchant bank fees
for Visa card, Master card.
And also, probably, there is too much availability of credit.
An oversupply of credit usually lands only the borrower in trouble.
But our deregulated banks became a bottomless pit of cash for big business, with spectacular
consequences for the banks, all of their customers, and the country as a whole.
I think it was unfortunate that deregulation coincided with boom conditions in the economy.
And clearly, in that environment, in a fierce competitive fight for market share, some mistakes
were made.
The credit skills, if you like, which are the fundamental skills of a banker, seem to
be, in many cases, thrown out the window.
Chris Corrigan is one of Australia's most respected international bankers.
As far back as 1986, he was sounding fiscal alarm bells over our bank's lemming-like rush
to lend.
In the case of Tri-Continental, something like 70% of every dollar that was lent is
now on bad or doubtful loan lists.
Now that has to be almost a world record.
But the prize must go to ANZ.
It lent $1.7 billion to 26-year-old Warwick Fairfax without ever having met him.
The combined debt write-offs from all our banks is simply staggering.
And one way or another, you are paying for it.
Well, I mean, the evidence is that had there not been such risky lending and such increased
provision for doubtful debts that the banks are making, that interest margins would be
lower.
Margins are where banks make their money.
They're the difference between what it costs a bank to open its doors and pay interest
to depositors and what the bank charges you to borrow money.
The bigger the gap, the bigger the profit.
Professor, your studies indicate that right now the average consumer could be worse off
under deregulation.
Yes, that's true.
We haven't done as well.
I think people would be very disappointed.
What's the biggest problem with Australian banks?
Small people seem to carry, you know, the disasters of bad banking practices.
Don't worry about the bank selling me up.
That's all right.
No, no, it's the banks I feel sorry for.
They're the ones having a tough time.
I mean, sure you can argue that they've taken our farms and our houses, our livestock, our
harvesters, our tractors, our machinery, our land, pretty well everything we ever owned,
but what are they going to do with it?
How are they going to make a go of it?
We couldn't.
No, no, no, poor bloody banks.
And here we are five years down the track not realising what was going on, getting further
and further into debt, working from bloody daylight to dark.
Banks fell victim to the downside of deregulation, a floating interest rate that just kept going
up.
The original loan was $450,000.
What did it end up being?
Over a million dollars.
So it more than doubled?
Yes, in just four years.
Foreign currency or offshore loans are another blight on the bank's deregulated track record.
Mike Darcy went to his local bank seeking advice on a commercial loan for this industrial
development in Taree.
Well, it must have meant a lot of incentive payments, mate, on.
They were selling them like a used car salesman.
Really?
Hard sell?
Very much hard sell.
They flogged a flawed product.
Thalidomide was a flawed product and it devastated Australian families and lives.
Foreign currency loans were a flawed banking product, but they promoted it vigorously and
very successfully.
Did anyone at any time ever say, well, hang on, think about this, there could be problems?
No.
No potential risks?
No.
Senator Paul McLean, the first federal politician to really tackle the banks, hears horror stories
like the Darcy's every day.
He describes the bank's handling of deregulation this way.
The pursuit of profit at the expense of ordinary Australians.
In addition to that, I believe that there is evidence of malpractice and corrupt practice
which must be seriously addressed.
But let's bring this back to basics.
What do you do if you want to take on a bank?
Well, for a start, you have to be prepared to lose everything, not just your case, but
potentially every major asset you own.
I would suggest that having regard to what legal costs are today, that anything less
than $50,000 would not justify running a case.
It's this imbalance of power that makes banking reform both difficult and painfully slow.
If governments don't legislate on behalf of consumers, then all most of us can do is try
gentle persuasion.
Then again, have you ever tried gentle persuasion with your bank?
$15?
No worries.
I'll just get some cash out of the machine.
Enter a fee.
Select an account.
Key an amount.
Transaction cancelled.
Insufficient funds.
What?
A pay went in two days ago.
Not into this little black duck.
It didn't.
There's pay in automatically every week.
Dream.
I want my money.
Return business hours.
I want my money.
I want my money.
I want my money.
I want my money.
I want my money.
I want my money.
I want my money.
I want my money.
I want my money.
I want my money.
I want my money.
Deletion of bondage!
Salary out.
Plus balance.
Deletion of bondage out for three weeks.
Day off and end of the week!
Nice and simple!
Currency linked aisles 1 and 2.
And then, always 1600 pounds of cash.
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Let's assume it's the Warsaw fitted house for $25 $27 on the salaried floor.
What?
That they won's to the house.
Are you the bloke who's responsible?
Yes I've been writing banking laws for the past two hundred years.
Not counting bank holidays.
How do I get my money?
You withdraw it.
But the bank said it's not in my account.
Show me your bank book.
What have you got for a receipt?
Any record at all?
Computer.
Got it in its memory.
Well see Mr. Computer and remind him.
No, no, it's a machine, not a person.
My boss pushed some buttons and my wage went from his account into my account.
Well did anyone see it go?
No, no, it went down the wire.
Must be very small money.
It's just electricity.
You get paid in electricity.
No, no, it's a cashless transaction.
You don't get paid at all.
This is hopeless.
I don't even know what electricity is.
Many bank practices became law because they were never successfully challenged in the
courts.
As for electronic banking, well there the law has simply failed to catch up.
I think it is very difficult because firstly the onus of proving your case lies upon you
if you are going to take on a bank.
It's this onus of proof which usually brings consumers unstuck.
Often documentation can be almost impossible to get out of a bank during a dispute.
So at the very least you've got to keep everything the bank sends you or gives you just in case.
Now if you throw away your receipt in effect that you get from the telemachine, how are
you going to prove whether or not you got out the amount the statement shows?
There are some unpopular bank practices that seem set to stay.
Dishonored check fees for example.
As well as charging the person who writes a dud check, banks also charge the innocent
party, the person who receives the worthless check.
By any fair minded measure these fees are unconscionable.
As with many of the other fees it appears sometimes that the level of the fees, what
the market will bear rather than what the actual cost of providing it is.
Sometimes though you can play the bank at its own game.
Here's another example.
Liza Carver purchased a bank check and that cost her three dollars.
As things turned out she didn't use it so Liza took it back to the bank to deposit the
funds into her account.
Remarkably the bank would not refund her money until she paid the bank to buy back its own
check.
The additional fee, six dollars.
I probably unlike many consumers thought to stand up for myself and demand to see a supervisor.
Most bank branches the supervisor has the discretion to waive fees and did so in my
case.
So what you're saying is don't be frightened, stand up for yourself and you can win.
Certainly sometimes.
If after talking to the bank your dispute remains unresolved there is somebody you can
go to who carries a lot of clout and has an excellent clean up rate and that's the independent
banking ombudsman based here in Melbourne.
His office will listen to your complaints and if they think it's justified will go into
bat on your behalf.
From what the ombudsman says goes the banks have to abide by his decision.
He's been in the job less than a year but in that time he's already awarded more than
a million dollars to disgruntled bank customers.
Most complained about area are terms conditions and fees relating to loans and they reflect
a breakdown in banker customer communication.
The ombudsman can mediate on disputes involving amounts up to one hundred thousand dollars
but there's a built in incentive for the banks to pay up before the ombudsman ever gets involved.
The bank with the most complaints will pay the most to the maintenance of the scheme
to encourage the banks to make sure that they resolve their complaints with their customers
direct.
We've got a customer service complaints procedure internally which means that our managers must
respond within 24 hours to a complaint and must have it resolved within 48 hours.
And all banks have been as keen on establishing these protocols as NAB.
Tracy Allery from Victoria's Consumer Advocacy Centre surveyed 16 banks to see what they
were offering.
There's no uniformity, each bank differs, each bank handles complaints differently and
in some cases within the bank they handle consumer complaints differently.
Of course before you complain to your bank you've got to actually understand your account
and that's often the biggest problem because the complexity of today's banking products
often make it extremely difficult for consumers to understand and then work out the difference
between one product and the next.
To illustrate the point let's return to our five phantom depositors and see how their
thousand dollar working accounts would have performed.
After 12 months in the mid-sized advanced bank fees and charges would drag our thousand
dollar working account into the red by $12.42.
And this is how the four majors performed, all in the red with NAB coming in at minus
$174, the most expensive in Australia.
Top of the list is the R&I Bank of Western Australia where you'd make $58.75, second
the Bank of Melbourne with an even $50.
Indeed our national survey reveals that if you want your working account to actually
work for you, local banks are generally best.
It's a similar story with straight deposit accounts.
If you were to deposit a small amount, say $50, then leave it alone, Tasmania Bank would
give you the best deal, paying a modest $3.30 after the first year.
Some of the other banks offer similar returns.
But there are plenty of banks that would take you backwards at the rate of knots.
Challenge in Victoria, minus $9.98.
Metway in Queensland, minus $17.96.
And once again, national Australia worst, consuming almost half your original deposit
in bank fees.
What has happened is that bank profitability has declined under conditions of competition.
Now banks are moving to what is called a user pays, that is that if they give you a service
you pay a fair price for it.
And that's basically what these fees are about.
Why pay fees when you're not getting any interest in a cheque account?
I think that is a bit lousy.
Good question.
Especially when you discover that as at June last year, banks held more than $15 billion
in cheque accounts that paid no interest.
The banks get it both ways with your average cheque account.
You've got your quarterly fees, you've got your fees per transaction, you've got your
application fees, etc.
They're dipping in at both ends.
There are 3.5 million cheques that are processed every day.
Those accounts are not low cost accounts, they cost the banks a considerable amount
of money to do the processing.
How is it that newer and more aggressive players can pay interest on cheque accounts?
No service can be absolutely free.
It has to be paid for from somewhere so that banks which are offering these accounts are
clearly recovering the cost of providing those services elsewhere.
But what if there were no banks at all?
There is just one thing.
What do we do if we run out of money?
Well you just get some money.
What do we do if we run out of money?
Well you just get some help from a bank, don't you?
A bank?
Out there?
Which bank?
Well here's a story that gives the Commonwealth Bank's clever advertising a very hollow ring.
We own this bank, we own this Commonwealth Bank and we're being treated very very shabbily.
What do the locals have to say about the bank closing?
Oh I can't repeat that.
No they weren't very pleased at all, they really weren't.
Ivanhoe and District, population 1000.
Here in far west of New South Wales, the nearest big town is hundreds of kilometres away and
the Commonwealth was the only bank in town.
It gave Ivanhoe just four weeks notice, then shut its doors.
Moving this EFTPOS machine at the local post office to handle all the community's banking
needs.
Our money has to be sent to Hay twice a week on the milk truck.
We can't use the electronic banking because it's a business account.
30 years ago I was canvassing the business places and buying cash off them to cash checks
and I'm back doing that again now.
I've spoken to people at the head of the bank and they were quite aggressive about
it.
They didn't seem to be at all understanding of our situation given the roads that we travel
and our conditions here.
They didn't think that we should expect any special treatment.
I don't think that anyone has a right to demand that a commercial organisation remain and
provide a service that it has in the past simply because it's been there in the past.
They should be subsidising smaller communities because there are many many others such as
Ivanhoe who will be in real danger now if they adopt a user pays.
You can only take that user pays so far.
If deregulation was the biggest thing to hit banking in the 80s the Martin Inquiry is the
event of the 90s.
An inquiry that has already considered thousands of submissions from consumers who've simply
had enough.
I think what it highlighted was a view that was in the community that banks didn't quite
do it according to the book.
That perhaps that when times got tough when there was perhaps an effective product they
walked away from their clients.
Unfortunately the banks are bracing themselves when the inquiry's report is handed to federal
parliament in November it will inevitably recommend change to the way banks do business.
They play such an integral role in benefiting Australia's economic wealth and welfare into
the future and therefore they must realise that that role they play carries certain responsibilities
to see that the benefits of competition are in fact being passed on to your customers.
Alan why does the banking industry in Australia have such a terrible image?
I don't know all the answers to that.
They certainly do have an appalling image problem and a problem which they have to address.
So the bottom line here is this you can make banks accountable for what they do.
After all banks need us as much as we need them.
That's business and that's the way it's always been.
Hello buddy.
Well, that's our program for tonight.
If you'd like details of our survey on how your bank rates against the others, telephone
0055 12201 and leave your name and address.
Just repeating that phone number, 0055 12201.
We'll be back again next week with our usual program.
Until then, good night.
Thanks for watching.