Friday, June 11, 2010

Figures Never Lie, But Bankers Might

It really comes as no surprise that the latest Reserve Bank figures have revealed a dramatic increase in bank fees in the past twelve months. The total fees collected amount to $12.7 billion, which is an increase of 9%, well above inflation. The bulk of the increase can be attributed to fees levied on business customers, who are now paying $7.6 billion, the fact is that any increase in the cost of business eventually flows through to the customer in the end. That is, if the business concerned can actually survive the more difficult trading conditions. But even retail customers like you and I are still getting stung if we have a credit card or a mortgage.

The fees charged on home loans grew by 17%, while credit card charges rose by 8%, and personal lending fees went up by 14%. Home loans in particular represent a graphic illustration of everything that is wrong about allowing the banks to get away with charging extortionate fees. The fact is that we are captive to the banks and we have no choice but to use their so called services, and it is nothing short of exploitative for them to impose fees for what should really be overheads. Mortgages are the category where customers are the least mobile. It’s a big inconvenience to change from one mortgage to another, and certainly not something that anyone would want to do over and over again looking for a better deal. So it’s not really a coincidence that the fees on mortgages have gone up the most with an increase of 17%.

Although the rules are supposed to allow the banks to charge reasonable fee to cover reasonable costs of providing services, surely these so called services should rightly be considered overheads. But even if we accept the need for some fees, which I believe is arguable, the truth is that with the total increase of all fees amounting to 9%, it is abundantly clear that the banks are opportunistically exploiting customers who are captive to their so called services, over and above anything that could be considered reasonable. The bottom line proves it, with bank profits continuing to expand at a rate which would embarrass even the mining companies... well, maybe not quite that fast, but you see what I mean.

We all know the banks are taking us for a ride, and the proof is in the figures. As they say, figures never lie, although I suspect that bankers might on occasion be tempted to stretch the truth.

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