Chapter 25:        IMPLEMENTATION OF ACTUAL COMPETITION IN THE BANKING SYSTEM?


 

MOTION: That the Rudd Government immediately provide all relevant government watchdog bodies with sufficient legal power to require the commercial banking sector to be competitive in all respects, including the punitive fees and charges that they apply to (a) “Overdraft Approval Fees” and the like and (b) “Dishonour Fees” such that the fees charged bear an accountable correspondence with the actual cost of providing the service.

Rationale:

Consider poor old Mum or Dad, as the principal bread-winner in a lowly paid part-time job, unable to ensure that the family bank account balance will be always sufficient to cover the house insurance or other direct debit on the date that it falls due. If the bank decides to honour the debit, then the Overdraft Approval Fee (OAF) is applied as an account charge far in excess of the cost of the overdraft plus a reasonable profit. As to how the fees charged for an overdraft approval relate to the actual cost of providing the overdraft is a complete mystery. The Commonwealth Bank for example has an OAF charge of $30 plus additional fees depending upon the number of OAF situations that have arisen every quarter. Similarly, consider that many banks charge around $45 for a dishonoured direct debit or a bounced cheque.

To repeat the story because it is amazing, consider again the issue of the actual overdraft fee of a lowly $30 per event plus other proportional monthly or quarterly fees. For example, the argument that a $30 fee for a $15 overdraft for 5 days is indicative of competition at work because some banks charge more is pure humbug – unadulterated dissembling. Even if the bank’s short term money supply were to cost the bank 20% per annum, at around usurious credit card rates to consumers, then the interest cost to the bank would be 20/100 x 5/365 x 1500c which equals approximately 4.1 cents. What other costs of delivery would there be? Getting the numbers correct would be a good trick as well which might include a few cents worth of computer time perhaps? Other overheads such as staffing and depreciation on infrastructure as well, perhaps? Ten cents per transaction at the outside say? What other costs would there be? To cover some other BS contingency, would a reasonable cost estimate total, be say, 20 cents all up? If so, then the gross profit would be circa $29.80? Not a bad little earner, eh? And so, the idiot economics’ commentators and lying bank CEO jockeys who claim that “The fee is simply a justifiable charge” persist with being disingenuous – spivs of the banks. As to why Howard and Costello refused to apply a few Chinese arm burns to the banks is inexplicable, other than being explained in political donation and legislative corruption terms.

Now the proverbial BS ball is in Rudd’s court of consumer opinion. Will the Rudd Government do anything about it, or will the Rudd Government assume the role of Rudd & Co ignore it and default to the issue being outside of their terms of reference? More of the same of what Howard and Costello did? Howard and Costello studiously ignored public opinion of the issue, while claiming that they were implementing “Responsible Government” in the guise of “Robust Democracy” in action? Ho? Ho? Ho? Pollie BS as usual? Yep. 

The Commonwealth Bank’s Overdraft Approval Fee (OAF) must be a nice little earner, which no doubt contributes similarly to record-profits being reaped by the major banks today. In turn the CEOs of banks believe that they must be worth at least $10M per annum and preferably much more. Is there any wonder that our Pollies reckon that they could earn similar amounts if they were to be in big business, which supposedly justifies their anomalous superannuation largesse in lieu of salary? Clearly, such Pollies have no qualms about a rip-off mentality salving their own egos. Such attitudes also account for Pollies having no problem with being undemocratic, because their egos tell them that they always know best what’s in everyone else’s best interests! Such egocentric pricks galore cannot justify their self-serving aggrandisement or self anointed sinecures.

 

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