By Matthew Knott
Australian banks are facing calls to be banned from promoting Dollarmites-styles savings programs in schools unless they are subject to strict regulation.
A Senate inquiry into credit card interest rates is also set to recommend legislative prohibitions on the use of data collected through school savings programs and an expanded role for the Australian Securities and Investments Commission in teaching financial literacy.
Senator Sam Dastyari said programs such as the Commonwealth Bank's Dollarmites, once "innocent" schemes to encourage children to save money, could now be used to "groom" them to become future credit card customers.Credit: Dominic Lorrimer
Labor Senator Sam Dastyari, who set up the inquiry, said he will write to the chief executives of major Australian banks this week asking them to detail what savings programs they run in schools, what data they collect and how it is being managed.
Senator Dastyari, shadow parliamentary secretary for school education and youth, said programs such as the Commonwealth Bank's Dollarmites club had begun as "innocent" schemes by state-owned entities to encourage children to save money.
But technology had opened the door for such programs to be used to "groom" young children to become future credit card customers.
The number of Commonwealth Bank Youth Saver accounts has grown from 75,000 in 2009 to the 273,000 currently.
Financial adviser Scott Pape told the Senate inquiry that allowing banks to teach financial literacy was "the equivalent of having Ronald McDonald teaching kids about nutrition".
Senator Dastyari said: "I intend to recommend to the Senate committee that we get banks out of schools or give them a much greater degree of regulation if they are going to be there.
"I think most parents would be really worried by the idea banks are teaching our children financial literacy."
Legislation should be enacted to ensure banks cannot use data collected on children to target them when they become adults, he said.
"If you have data on someone from the age of 5 until 18 you have a very good profile of that person and what their future spending habits would be," Senator Dastyari said. "I am not filled with confidence by the banks' assurances on this, so I am writing to the CEOs to ask why they should be allowed to run these programs."
Commonwealth Bank chief executive Ian Narev recently told Fairfax Media: "We are happy to get early customers early on.
"That is definitely a benefit of school banking."
A Commonwealth Bank spokesman said the company had strict policies on the protection of customer data – including for schoolchildren.
"We are proud to stand by our record in Australian schools and our commitment to education," a Commonwealth Bank spokesman said.
"As the Committee has heard in the Inquiry, the Commonwealth Bank does not, as a rule, market credit card products to customers until they are 21.
"We have already invited Senator Sam Dastyari and other members of the Committee to attend a Start Smart session to see the benefits of our work in schools first-hand"
"Of the customers who bank with us under the age of 18, only 25 per cent are in our school banking program."
Mr Narev announced earlier this year the bank was doubling its investment in its school-based financial literacy programs, and aims to push more than 1 million students through its "Start Smart" interactive financial literacy program over the next two years.