The banking regulator has revealed that First Nations people are paying up to $3000 in overdrawn fees to banks each year, which has been deemed completely unacceptable.
A review conducted by the Australian Securities and Investments Commission (ASIC) found that many Indigenous customers are paying for high fee accounts despite being eligible for a low-fee account.
The banking regulator has issued notices to those banks charging higher than average fees to Indigenous people and has shone a light on the issue in a move to stamp out the practice of overcharging.
A 2018 study found that Indigenous people experience disproportionate financial disadvantage. The survey of more than 600 Aboriginal and Torres Strait Islander people found fewer than two in five could access $2000 for an emergency, compared with four in five from the wider population. Given the current cost of living crisis, the situation for many has no doubt worsened in the five years since.
"It's unacceptable that we have found many consumers continuing to experience harm through transaction account fees, when banks know these people could be in low-fee accounts," ASIC Commissioner Danielle Press said.
"Current processes to transfer eligible customers to low-fee accounts are overwhelmingly ineffective. We have raised these issues with the banks included in the review. ASIC wants to see action taken swiftly to charnge these customers to a low-fee option."
The review found banks were aware of high numbers of customers eligible for low-fee accounts but, the majority of banks' processes to transfer these eligible customers to low-fee accounts were ineffective. This figure differed between institutions, with the majority of banks having migration rates as low as between 0.5 per cent to 3 per cent. One of the more effective processes saw a 47 per cent migration rate.
The review also found more than 110,000 consumers in identified locations with higher-than-average proportions of First Nations people and in receipt of AbStudy payments are in high fee accounts, despite being eligible for a low-fee account. These consumers paid a collective $6 million in fees over a 12-month period, which would have been avoided if more attention was paid to the situation by the financial institutions.
The most prevalent fee was an 'overdraw fee', which isn't charged on a low-fee account.
ASIC said that one bank has removed overdrawn, dishonour and withdrawal fees from its transaction accounts for all customers, but that more work needs to be done.
"We are asking banks when they will migrate eligible customers to low-fee accounts, and whether they will remediate impacted customers. We are also asking what changes will be made to ensure tailored Indigenous services are effective. We will be monitoring these issues to ensure changes are made and will prepare a report on this project later in 2023," Ms Press said.
The government's MoneySmart website,offers tips specifically for Indigenous people on how to make the most of their money. The My Money Dream website was created by the First Nations Foundation specifically to bolster financial literacy among Indigenous and Torres Strait Islanders.
