Bank charges deter poor from signing up


“A lot of the difficulties that people experience are because they don’t understand the structure of fees and charges,” Neville Melville, the ombudsman for banking services, told the competition commission’s inquiry into bank fees.

The competition regulator started public hearings into bank charges after a study raised concerns about fees and the lack of competition among the country’s biggest lenders.

Half of the country’s adult population does not have a bank account.

More than 3.3 million customers have opened low-cost bank accounts tailored for the poor since banks started offering the Mzansi accounts. Still, fees charged by Capitec Bank Holdings, a provider of small loans not backed by assets, are lower than the Mzansi account.

Melville’s office is seeking legal opinion on whether banks can charge penalties for bounced cheques or debit order transactions made when there is no money in the account.

Thabani Jali, a former deputy president of the high court, is leading the panel to focus on the level and structure of charges made by banks, the process by which charges are set and the level of rivalry.

The commission released a study in April that found fees charged by Standard Bank, Absa, Nedbank Group and First National Bank, were not transparent enough and should be disclosed or regulated.

So-called bundling of services, where banks combine different packages and price structures, made it very hard for customers to compare providers, said Penelope Hawkins, who conducted the study on behalf of FEAsibility, an economic research company appointed by the antitrust regulator.

There was little evidence of a link between the costs incurred by banks and charges to consumers, she told the commission. ‘ Bloomberg.

November 2006
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