Only regulation can save us from bad bank behaviour

In an incredible display of sentiment against the banks, we have seen tens of thousands of people join up to the class action over unfair fees in the past week. For bank workers who have to face unhappy customers at the front line this is no surprise.

Fees are always going to be unpopular; but if they exceed the actual costs that banks incur and don’t directly correlate to service provision, then people have a right to feel annoyed.

Banks are feeling the pressure. After the release of our survey results earlier this month, which showed a great deal of support for stronger regulations of bank behaviour, the class action case against unfair fees is yet another wake up call to banks who think they can charge excessive fees without repercussions.

We have no illusions about banks and their behaviour. We know what to expect. If the consumer action case is successful, we fear banks will simply find another way to profit at the pain of consumers, and cut Australian staff numbers to cut their costs.

The track record of banks in Australia has been to put executive salaries and profits above average account holders and customers. They continue to over-emphasise the provision of credit and reward short-term risk, behaviour that proved so devastating in other countries.

This is why we need better regulation of the banking sector. Legal proceedings by consumers against the banks will help in pressuring banks to reform their ways but better regulation is essential to ensure banking practices are permanently and more effectively reformed.

If the Government introduced better regulation to our banking system, there would be no need for consumers to take legal action, and it would improve the fundamentals of banking behaviour in this country.

Australians are ready for a banking sector that offers sound financial advice, allows staff to do their job without the pressure of sales targets, and stronger commitments to keeping customers personal data in Australia instead of sending it overseas without notification.

The Finance Sector Union has been arguing for some time that the big banks should take more responsibility for their actions, especially those that adversely affect bank workers and the public. There is a lot more that banks could be doing to restore trust.

The Rudd Government is presented with an opportunity to regulate banks on issues that are important to the community like executive pay, risky lending practices, exceeding the RBA’s interest rates, tying workers’ salaries to sales targets that pushes unsustainable debt onto consumers and excessive fees.

That’s why we are calling for stronger regulation of the big four banks, and a commitment to making banking fairer on five key fronts:

1. Bank workers’ salaries decided by customer service, not selling debt products.
2. Executives don’t get massive salaries for risky, short term thinking.
3. Investment in Australian jobs and skills with no off-shoring.
4. The Reserve bank decides interest rates, not the big four.
5. Direct links between fees and services.

This class action highlights the public’s growing resentment towards banks. However, the only sustainable solution is for the Federal Government to regulate against banks padding their bottom lines over and above the financial health of the public.

Leon Carter, National Secretary, FSU