ABA softens stance on basic accounts, farm fees

The ACCC has authorised changes to the Australian Banking Association's code of practice to prescribe criteria for basic bank accounts and, separately, not to impose default interest on farmers affected by natural disasters.

This action was initiated six months ago when the ABA, on behalf of its 23 members, applied for authorisation to amend its Banking Code to codify the concept, minimum eligibility criteria and features of a basic bank account, and to offer concessions to farming operations affected by drought or natural disaster.

In taking this action, the ABA was responding to specific recommendations made in the final report of the Hayne royal commission relating to informal overdrafts, dishonour fees, and default interest charged on loans secured by agricultural land.

ACCC authorisation was needed because changes to the Banking Code require competing banks to reach an agreement through the ABA for actions that would otherwise be in breach of competition laws.

The ABA is also dealing with the Australian Securities and Investments Commission, looking to have these changes and other amendments approved under the Corporations Act.

ACCC authorisation was sought by the ABA to prescribe certain minimum requirements for basic bank accounts offered by its members, and to give undertakings in the Code of Practice that its members would not:

•    allow informal overdrafts on basic bank accounts, nor on certain concessional low or no fee transaction;
•    charge dishonour fees or overdrawn fees on basic bank accounts, or concessional low or no fee transaction accounts); or
•    charge default interest on loans provided to farmers for the purposes of a farming operation affected by drought or natural disaster.

The ABA pushed the ACCC for approval - or via an interim order - to publish its new Code of Practice on 1 July 2019. That did not happen until 11 July, and even then did not allow all changes sought by the ABA.

In September, apparently swayed by an earlier joint submission from the Consumer Action Law Centre, Financial Rights Legal Centre and Financial Counselling Australia, the ACCC foreshadowed it was moving to impose additional conditions to the proposed Banking Code, over and above those sought by the ABA.

Subsequently, the package of changes, announced yesterday, will see the ABA's Code of Banking Practice include changes to:

•    prohibit overdrawn fees, dishonour fees and informal overdrafts on low or no fee basic accounts held by eligible customers, unless agreed to by the customer;

•    prevent default interest and fees being charged on agricultural loans in areas affected by drought and other natural disasters;

•    ensure a basic bank account product is set up to offer: no minimum deposits; free direct debit facilities; access to a debit card at no extra cost; and free unlimited domestic transactions for eligible customers; and

•    require ABA member banks to proactively identify customers who may be eligible for basic accounts, and to report progress on all these points to the ACCC.

"We had concerns that the original proposed code did not fully reflect the spirit of the Hayne Royal Commission's recommendations about basic accounts," said ACCC deputy chair Delia Rickard.

"For example, low income customers could have been charged interest rates of up to 20 per cent on overdrawn amounts despite not having agreed to take on an overdraft facility."

"The new Banking Code will address a significant source of harm to farmers experiencing drought," Rickard said.

The ABA requested authorisation for a period of 10 years. The ACCC gave five years.

The proposed changes will come into force on 1 March 2020, pending ASIC's approval of a second round of changes to the Banking Code separate to this review process.