Bank breaks ranks to cut fees
Banks are under pressure to scrap controversial fees that cost customers about $100 million a year, with one already breaking ranks.
Bank of New Zealand says that from September 1 it will scrap a $35 dishonour fee charged when a payment bounces, and a $20 honour fee when an account is overdrawn without an overdraft facility. A $5 fee for an unpaid bill payment will also end.
It is estimated the actual cost of bouncing or honouring a transaction is about $1.
BNZ's Australian owner, National Australia Bank, has made a similar move. It applies to retail and business customers.
BNZ chief executive Andrew Thorburn said the fees were "the No1" source of customer complaints and getting rid of them would improve the bank's reputation and ease pressure on staff.
Customers were confused about how and when the fees were charged, Mr Thorburn said.
Consumer New Zealand chief executive Sue Chetwin said BNZ's move was "long overdue and we hope the other banks follow suit quickly".
"The honour and dishonour fees are very high and they are unfair" particularly when it could be just a matter of timing between an expected deposit and payment, Ms Chetwin said.
ASB Bank said it would announce a review of its fees in about six weeks. Other banks said fees were always under review.
The Australian Government plans to introduce a new consumer law in January requiring banks to justify their A$40 penalty fees when challenged to do so by customers.
Mr Thorburn said the cost of the transaction was only one factor in setting the penalty fee. "You had to set a level such that it would, amongst other things, be a deterrent."
But given that the fees were charged about one million times a year by the BNZ, it was not a deterrent at all. He would not disclose the actual cost of honouring or dishonouring a payment.
BNZ earned about $25 million a year from the fees.
Massey University banking expert David Tripe estimated the penalty fees collectively earned the main banks $100 million a year.
Mr Tripe said there was a risk that withdrawing the fees could encourage an increase in dishonoured payments, which would add to banks' costs.
- By ROELAND van den BERGH, the Dominion Post