Page 4647 - Week 15 - Wednesday, 15 December 1993
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Once upon a time banks were benevolent institutions, the pillars of society and the creators of wealth and opportunity. This image sadly has gone. Most people regard banks with ill-concealed contempt and loathing. They are treated as a nasty fact of life. People are feeling powerless in the face of the banks' laws, rules and regulations, and the resentment is still growing. Fees for putting your money in the bank and charges for transactions have all occurred when the actual labour cost of administering those functions is the lowest ever, with the introduction of computer technology.
Sadly, the banks are largely to blame for the feeling of resentment. Their actions have left them exposed to criticism and resentment. It is my hope that the banks will change; that the pressure from people dissatisfied with the current system will create a demand for a fairer and more equitable banking system. But there are great stakes at risk, as we have found in New South Wales with the Westpac letters and in the Federal arena with the Martin inquiry into banking, where the banks were found wanting. For example, it was found that credit charges on plastic cards were far too high. The banking sector's response has been to lower interest rates and charge fees, which does not offer lots of relief to clients. This system will probably lead to the banks making even greater profits on credit cards. The people on the street lose out again. It is the Federal Treasurer who must accept that his endorsement of this system of charges will lead or can lead to the ruin and unfair and inequitable fleecing of the customer yet again.
The State Bank of New South Wales came in for a lot of criticism for loans on rural properties. One example the Martin inquiry examined was the sale of a rural mortgage to another bank without consultation with the mortgagee. This is clearly unethical behaviour at a level which the common man finds bewildering and difficult to cope with. The mortgagee in the end found relief in the courts, but it was a David and Goliath competition, at great personal cost and distress. In most instances the banks are never questioned because the power imbalance is just too great. However, in recent years the courts are ruling in favour of the individual in disputes with banks. So there is an option to seek a remedy. However, as every little man knows, after banks, lawyers are also in for more than their fair share of the chop.
In New South Wales the Westpac letters revealed that Westpac had advised clients to take out foreign loans at a lower interest rate. This was fine until the Australian dollar fell. In some instances their loans nearly doubled almost overnight. Those with the foreign loans were facing ruin. However, Westpac was responsible for that because it did not advise customers to protect themselves by hedging their interests against the pitfall of a skyrocketing interest rate. Westpac was not alone, mind you, and another three major banks had to pay out on those loans. The cover-up in the frantic scramble after the event led to the Commonwealth Parliament using every available power to force the bank to reveal its documents and therefore own up to its conduct. One wonders what was worse, the bank's conduct or its attempts to cover up.
One complaint was regarding the fluctuation in home mortgages. The Advance Bank was found to be very quick in increasing interest rates, and therefore repayments, but very slow in decreasing interest rates. In fact, the consumer had to approach the bank and specifically request the reduction in repayments if they wished to take advantage of the decrease in interest rates.
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