What banking customers must do now the Royal Commission is over
The banking royal commission is over but customers need to take action now to ensure they are not getting ripped off.
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Don’t bank on the royal commission findings protecting you, according to experts who have urged vigilance against ongoing ripoffs.
Nearly a year after the first hearings, Commissioner Kenneth Hayne released his final report this week, sending a strong message to the finance industry that bad behaviour will not be tolerated.
So much so that his cutting criticism of NAB chairman Ken Henry and chief executive Andrew Thorburn cost them their jobs within 72 hours, just as AMP’s top brass had been forced out in response to revelations during the hearings.
While Mr Hayne’s report has shone a light on the banking, mortgage broking, super, insurance and financial advice sectors, money gurus say it’s as important as ever to be on guard against the greed that got those sectors in trouble in the first place.
Whether it be your home loan or retirement funds, complacency will cost you money, they warn.
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MORE: What banking report means for home buyers
NAB has long way to go to win back trust.
“It’s not over yet,” said Consumer Action Law Centre chief executive Gerard Brody.
He urged all Australians to be proactive in seeking out good financial deals.
“It can be really challenging for consumers because they have the feeling (banks, insurers) are all the same,” Mr Brody said.
Mr Brody said until Hayne’s recommendations are mandated “banks are going to continue to fight for the status quo.”
“There’s more work to be done before people can expect a lot of change from the finance industry,” he said.
“Look at the products you are on and make sure you are on the best deal and stop paying fees unnecessarily.”
Some of the recommendations could take several years to implement including the incremental fading out of mortgage brokers’ commissions and move to customers paying an upfront fee.
Home Loan Experts’ managing director Otto Dargan said the ban on mortgage exit fees in 2011 will now be simply replaced with a mortgage entry fee if the changes are implemented.
“The plan to bring in an entry fee is considerably worse,” he said.
“First home buyers may need a larger deposit and customers in financial difficulty may find it harder to get the help they need.”
Despite the cost being able to be added to the loan amount, Mr Dargan said it could result in problems including pushing up the customer’s loan-to-value ratio.
The mortgage broking industry has been up in arms over the recommendations since Monday and warned that it could result in reducing competition in the industry and pushing customers to go direct and sign up with a major four lender.
Commissioner Hayne handed down 76 recommendations and some of the major changes include:
* Making customers pay an upfront fee to use a mortgage broker.
* Financial advisers providing clients annually with the fees they will be charged.
* Only having one default super account.
* Banning the hawking of insurance products.
Financial comparison website RateCity’s spokeswoman Sally Tindall said customers should negotiate with their bank because they are all hungry for new business, particularly after month of exposing financial service providers of ripping innocent customers of their hard-earned cash.
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“Check you are on the right financial products, what we have seen is some banks have been charging excessive fees in an uncompetitive manner,” she said.
“You need to trust your bank and if you don’t trust them find one that you do because this is your money.”
Ms Tindall said if customers do switch institutions they should test out a bank’s customer service, their email capabilities and live chat functions to ensure they are responsive and helpful.
Certified financial planner Patrick Canion said customers must go through their financial products with a fine tooth comb and then demand better deals.
“Hold your banks to account, hold your super funds to account too,” he said.
“With your insurance, if commissions do go down look critically at your premiums.”
Super funds also copped a bashing in the Royal Commission.
Industry Super Australia’s chief executive officer Bernie Dean said many members have already taken action to jump funds to reduce their fees and save.
“People aren’t mugs — they’ve been voting with their feet and switching to high performing, scandal free super funds,” he said.
“This trend has been going on for a while, but it definitely picked up big time last year off the back of the news coming out of the Royal Commission.”
He said fund members should check their pay slips to ensure they are being paid super and consolidate account multiple accounts to avoid being charged unnecessary fees.
“For those thinking about switching funds, look for one of those high-performing funds with low fees that plenty of others have been giving the tick of approval to following the royal commission,” Mr Dean said.
What deals should you be getting?
HOME LOANS
Owner occupier, principal and interest repayments
Interest rates: lowest: 3.44 per cent, average: 4.30 per cent
Annual fees: lowest $0, average $131
— 46 per cent of home loans and $0 annual fees
— 62 per cent of home loans have $0 upfront fees
CREDIT CARDS
Lowest interest rate: 8.99 per cent
Average interest rate: 17.01 per cent
Ongoing fees: lowest $0, average $140
— 14 per cent of credit cards have $0 annual fees
SUPERANNUATION
Annual fees on a $50,000 balance
Lowest fees: $243, average $693
*Fee excludes cost of insurance
Source: Ratecity.com.au
Originally published as What banking customers must do now the Royal Commission is over
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