Monday, November 8, 2010

Thanks For Not Mugging Me Anymore.

Welcome to Bank Bashers Anonymous. My name is Leon, and I am a bank basher. In my own defence, I would point out that the banks do seem to go out of their way to encourage us to take aim at them. Slagging the banks might be a cheap shot at an easy target, but at the end of the day, it doesn’t actually have any impact upon them at all. They really don’t care, in fact if anything they seem to derive a perverse kind of enjoyment out of it. Let’s face it, with $22 billion profit between the big four and with their executives getting paid more money than a lotto winner, they’re the ones who are laughing all the way to the, well er bank.

Of course, they do provide so much ammunition for the humble bank basher such as myself that it is impossible to ignore. As I have stated countless times before there is nothing wrong with any business making a profit, but in the case of the banks it is the context in which those profits are made which really gets up people’s noses. It’s the unjustified fees and charges, it’s the decisions to increase mortgage interest rates over and above the Reserve Bank official rates, and it’s the willingness to destroy the livelihoods of Australian families by retrenching staff and replacing them with offshore contractors.

No wonder both the government and the opposition are now promising to do something about it, and the first cab off the rank is apparently a move by the federal Treasurer to outlaw mortgage exit fees. But wait a minute! Here come the banks, apparently preparing to launch a pre-emptive strike by abolishing such fees of their own choice. Presumably, this is a move intended to stave of the threat of having tighter regulation imposed upon them, and if it means that these unfair and unethical fees disappear that’s very good news. But it shouldn’t mean that they get let off the hook by the government.

There is no justification for these exit fees, and there never has been. They are nothing more than a mechanism to prevent customers switching to another bank or financial institution, and as such are clearly anti-competitive. They are also clearly nonsensical. If I borrowed $100 from you and promised to pay you back at the end of the month, only to find myself in a position to pay you back sooner I would not expect you to charge me extra for repaying my debt ahead of the due date. And yet that is exactly what the banks do by charging up to $1000 to any customer who has the audacity to pay back the money he owes the bank ahead of time.

This ludicrous practice cannot even be justified by the spurious claim that the bank needs to cover the cost of discharging the mortgage. Aside from the usual legal costs which would apply no matter when the loan was finalised, it is only going to take a staff member a few minutes to enter the data into the computer system, sign a few papers, and file it all away. Unless it is done by the C. E. O. himself, the cost of the employee’s wages will be something like $30 or so. If the banks really are about to abandon this vile practice, it is no more admirable than the mugger who has finally decided to stop beating you over the head.

That’s why, regardless of whether or not the banks act of their own volition, there still needs to be appropriate regulation to ensure that they never do it again.

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