Banks' failure to pass on rate cuts to home loan customers prompts ACCC inquiry

Banks' failure to pass on rate cuts to home loan customers prompts ACCC inquiry
Banks' failure to pass on rate cuts to home loan customers prompts ACCC inquiry

The Federal Treasurer Josh Frydenberg has asked the ACCC to investigate the banking sector over its refusal to pass on interest rate cuts to customers in full. 

He has asked the Australian Competition and Consumer Commission to look into the pricing of residential mortgage products.

The competition watchdog will also report back on any obstacles customers face in switching banks. 

It will examine the entire sector but the Government has made it clear that the big four banks will be the focus.

The ACCC is able to use “compulsory information-gathering powers” to obtain data from financial institutions, through holding an inquiry under Part VIIA of the Competition and Consumer Act (2010).

“We will aim to provide answers to the questions that banking customers have long asked,” said ACCC chair Rod Sims.

Mr Frydenberg said customers are "sick and tired of the merry dance" as the banks have neglected to pass on the rate in full despite consistent calls from the Government and the RBA. 

"The banks have just ignored that advice and that call," Mr Frydenberg said. 

"We need the ACCC to use its particular powers to compel documentation to lift the hood and get to the bottom of this issue." 

"The Aust people are sick of the merry dance where the RBA reduces the cash rate, political leaders AND the RBA call on the banks to pass them on in full AND that advice is ignored."

However Mr Frydenberg ruled out introducing legislation to force the banks to pass on the rate in full.

He phoned the chief executives of the big four banks on Sunday and told them the inquiry could help them "clear the air" and explain why they had not passed on the rate in full. 

The Australian Banking Association (ABA) has said the banks stand ready to assist the ACCC in the inquiry.

"Banks are no stranger to public scrutiny and look forward to the opportunity to cast more light on mortgage pricing and the many important factors that influence the setting of interest rates," the ABA advised.

"The first priority of Australia’s banks is the implementation of the Royal Commission.

"Banks are also working night and day to prepare for the Consumer Data Right to empower customers to more easily shop around for the financial service that best meets their needs."

The Customer Owned Banking Association (COBA) has welcomed the ACCC's inquiry into home loan pricing and competition in the retail banking market.

COBA’s director of strategy Sally Mackenzie said it’s important that the inquiry investigates ways to make it easier for consumers to switch banks while avoiding more red tape.

“This inquiry is an opportunity to deliver a more competitive banking sector by examining what is holding consumers back from switching bank providers.

“Empowering consumers to switch their banking and to shop around is an unambiguously good thing.

“A more competitive market will make all players care more about their customers.

“There are barriers that prevent consumers from switching, which makes it challenging for smaller banks to win market share from the big four banks.

“Consumers can benefit personally by shopping around, and the market will function more effectively if there is more intense competition for borrowers.

“It’s important that policy makers empower consumers to drive competition.

“Policy makers need to careful consider regulatory interventions because smaller players are already subject to a disproportionately high regulatory burden.

“We look forward to this inquiry coming up with creative new ways to unleash consumer power.”

Tags: 
Interest Rates Banking Sector

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