Exception fees often the norm

Almost one third of credit card fees paid by retail bank customers and more than a quarter of deposit account fees are exception fees.

The Reserve Bank's annual review of bank fees, released yesterday, provides a detailed analysis of exception fees for the first time. What it shows is that penalties for late payments on credit cards, direct debits that cannot be honoured, overdrawn transaction accounts and spending over the limit on credit cards make up 20 per cent of all fees paid on retail accounts.

Because this is the first time the RBA has collected separate data on exception fees there are no comparisons with prior years.

Consumer groups have long criticised the banks for charging these fees, which they argue have a disproportionate impact on low income earners and people facing financial hardship.

The banks have made some changes in response to these criticisms. Over the past 18 months some of the banks have lowered exception fees for certain customers and introduced account changes that stop customers overdrawing.

Overall, the RBA figures show that bank fees rose eight per cent in 2008 from $10.7 to $11.6 billion. Business customers pay 58 per cent and retail customers pay 42 per cent of the total.

According to the report the growth in fee income was a result of greater use of banking services, rather than higher unit charges.

However, the report noted that unit charges on housing loans and credit cards rose.