When was the last time you were encouraged to open an unnecessary bank account, or apply for a new credit card? Banks use these sales to track performance of certain staff and tellers, but it's hardly ever in the best interests of the customer to open new accounts or take on new debts.
In an article from The New Daily on January 19, an anonymous bank teller told of a time they encouraged one customer to open nine separate bank accounts so they would meet their sales targets. Those nine accounts would have been virtually useless to the customer, and they would have had to pay monthly or annual fees to keep them open, even if there was no money in them.
That's not what a bank should be doing – they should be helping people to achieve their financial dreams, not hurting their chances of ever achieving financial security.
What is being done to control these unfair banking practices?
A report into the state of banking practices in Australia, carried out by Stephen Sedgwick and released on April 19, does not recommend these incentive pay schemes are abolished. Instead, he points to the Financial Services Authority's (FSA) tests to determine whether a bank is acting in the best interests of its customers. The Consumer Action Law Centre comments:
"The FSA conception neglects to address whether the consumer derives a benefit or value for the product or products purchased, and does not address the need for after-sales service or the long-term nature of financial services – which require the maintenance of an ongoing client-trader relationship."
Erin Turner commented that the recommendations were a step in the right direction, but not a silver bullet.
Once a customer has been offered a certain product, they should be guided through why it's useful to them, and shown the ropes – not just left to fend for themselves. Mr Sedgwick did recommend that only 33 per cent of all banking incentive platforms be based on financial targets such as sales, but this recommendation will not be actioned until 2020.
The Sedgwick report included 21 recommendations to bank managers and officials about how to change banking so the customer didn't inherently despise banks. Six of those recommendations were about the culture of banks, and how a philosophical change could alter that. CHOICE spokesperson Erin Turner commented that the recommendations were a step in the right direction, but not a silver bullet:
"What matters is bank culture. Even if incentives are a tiny fraction of pay, if a branch manager focuses on it, it can become a big problem. 33 per cent is better than 50 per cent, but zero is better than 33 per cent."
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