Banks say fee regulation is ‘communism’

Ralph Norris.

The big four banks are squealing at a Greens plan to introduce bank regulation legislation to parliament and at a class action being considered against banks that gouge borrowers through variable interest rate loans.

The Commonwealth Bank (CBA), Westpac, ANZ and the National Australia Bank hiked interest rates above the 0.25% rise declared by the Reserve Bank of Australia (RBA) on November 3. The Australian Institute said on November 15 the rise would give the banks $1.2 billion more profit.

On November 14, Greens Senator Bob Brown said the government should freeze bank interest rate rises above RBA rises for two years. The Greens also want to ban $2 ATM fees and cap the level of mortgage exit fees.

These proposals are modest — Britain adopted the ATM fee ban in 2001 — but the major parties rejected even this limited “re-regulation”. Shadow treasurer Joe Hockey said the Greens' measures would limit lending and disadvantage customers.

CBA CEO Ralph Norris went further on November 16.

According to the Herald Sun, Norris said: "It's very easy to give away somebody else's property. This sort of stuff we've seen in Eastern [European] countries prior to the fall of the Iron Curtain, when people's property rights were abrogated.
"I think you're getting on to a very slippery slope when politicians start talking about mandating against those fees."

The same day, the CBA announced a $1.6 billion quarterly profit.

An upcoming case by Sydney lawyer John Mahony proposes to challenge banks’ power to impose whatever interest rates they wish and supports calls for greater regulation.

Mahony Dominic Lawyers considered bringing a class action against the major banks in April 2009, when the banks did not pass on big interest rate cuts to mortgage holders.

More than 350 people contacted the firm within weeks.

The firm’s website said home loan contracts in Australia were, “essentially harsh and unconscionable as one party [the bank] has unfair and unlimited discretion in the performance of the mortgage contract”.

Mahony's proposal would stop banks changing interest rates in home loan contracts.

He told Sydney radio host Alan Jones in February: “An interest clause may be void for uncertainty if it is simply provided that the loan provider may select any interest rate it pleases.”

The CBA says its variable rate contract allows for “flexibility” whereas a fixed rate contract is more expensive and the bank can charge mortgage holders more if they make repayments ahead of schedule.

The CBA raised its interest rate almost double that allocated by the RBA and was followed shortly by the others. This price-gouging racket has angered many mortagage holders.

Brown told ABC Radio on November 15: "The banks need some hauling in."

Mahony's website called for support against the “substantial fighting fund” of the banks if a class action were to move forward.

“Unless a large number of people come together”, it said, “then nothing will change and we will all remain hapless victims of an aggressively greedy banking system”.

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