Government to facilitate bank account switching

Following a meeting with the Council of Financial Regulators on 8 February 2008, the Treasurer has announced a package of 4 measures to promote competition in the retail banking market by making it easier for customers to switch accounts between banks.

The measures are:

• A listing and switching service that requires banks to provide their customers with accurate information on all direct debits and credits to take to a new bank for easier transferral, if they switch.  Banks will also be required to assist new customers to re-establish their direct debits and credits;
• One single consumer complaints hotline 1300 300 630 providing a first contact point for all consumer complaints about basic banking products – to be provided and maintained by the Australian Securities and Investments Commission (ASIC);
• Comprehensive consumer education resources , including a detailed and informative web site providing advice on how to switch, and the costs and benefits of doing so, through the www.understandingmoney.gov.au site; and
• An ASIC-led industry review of the fairness of entry, exit and early termination fees that apply to mortgage accounts and providing better information to consumers to inform their switching decisions.

Despite previous denials that it would regulate bank fees, the Government has expressed its desire that the ASIC review would be " shining a light on fees...(and) putting downward pressure on them".

Implementation will begin immediately, and all aspects of the switching package will be finalised by November 2008.

Initially the listing and switching service will be operational in an interim form that involves banks providing written advice and support until IT systems allow full implementation by November 2008.

The Reserve Bank of Australia (RBA) will oversee the Industry initiatives.

Separately  the Australian Payments Clearing Association (APCA) has been reviewing ways to improve the switching of transaction accounts, particularly the movement of standing instructions (direct credits and debits) on accounts (see my November post here and APCA's January Press Release here (pdf)).

Also note section 72(1)(c) of the Consumer Credit Code which allows a Court to review an unconscionable early termination fee under a consumer credit contract.