How a royal commission into banks could impact you
A royal commission could mean a change in the way banks operate. Discover how this could impact you.
Over the last few months, it’s no secret that banks have been under the pump by the likes of the Senate inquiry and politicians for misleading customers, exorbitant surcharges and, as of late, allegations of fraud and shoddy financial advice.
Politicians have decided that enough is enough. Over the last week, a number of both National and Liberal party politicians now support the Labor party’s push for a royal commission inquiry into major Australian banks. Prime Minister Malcolm Turnbull and a number of his frontbench colleagues argue that, rather than a royal commission, more funding should be put into the existing regulatory bodies that monitor the banks.
Deputy Prime Minister Barnaby Joyce has argued that it is the job of the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) to look into it. However, the Liberal MP Philip Ruddock has warned banks that they must address some of these concerns if they want to avoid a royal commission. The Federal Opposition and shadow treasurer Chris Bowen argues that a royal commission would be ‘more transparent’ and would result in a more thorough investigation.
But if there is a royal commission into the banks, what does this mean for customers?
What is a royal commission?
A royal commission is an independent public inquiry led by the state or federal government. An example of a recent royal commission is the royal commission into trade union governance and corruption in 2014-2015. The commission involved six volumes and revealed widespread misconduct by union officials in Australia.
A royal commission into the banks would have the resources to conduct thorough research into the card, savings accounts and insurance providers and, depending on the results, could lead to greater transparency, stricter regulations and better experiences for customers.
What can I do to protect myself?
At this point, it’s difficult to tell whether a royal commission will go ahead, but there’s no denying that the banks are under the microscope at the moment. While a royal commission into the banks’ behaviour would hopefully result in greater ethical treatment of customers, there are ways you can protect yourself in the meantime.
Do your research
Whether you’re looking for a credit card, savings account or insurance cover, there are many banking options available and it’s important to compare your options and do the research before applying anywhere. Most banks provide similar products and offers, so it’s important to pay attention to the details (such as the fees and features) when comparing your options. You can start comparing some of your credit card options side by side today.
Choose the right card
There are many different types of credit cards on the market, but not all of them are going to work for you. Just because you’ve been approved for a credit card doesn’t mean it was the right option.
Consider what you want to get out of your credit card (such as debt consolidation, financial security in case of emergencies or rewards) and determine which type of card is right for you. Once you’ve done this, you can use the comparison tables on finder to boil down your options based on the features on offer and the costs involved. Consider the eligibility requirements, look at the ongoing fees and consider what you can afford and need out of the card.
Read the fine print
In 2015, the banks were accused of capitalising on consumer inattention to keep interest rates high. While credit cards can be complicated products, familiarising yourself with the card’s product disclosure statement (PDS) will ensure that you’re not blindsided by the banks. People often complain about “hidden” credit card fees, but all of the fees, charges and features of the card have to be made available in the PDS. These documents are made available on the banks’ website and usually cover everything from ongoing costs, rewards terms and conditions and features. If you’re overwhelmed by the information in the PDS, you can start your research with the review pages and guides available on finder.
Say no to credit limit increases
Banks have been put under fire for giving customers misguided financial advice, so it might be time to take control of your own financial decisions. Banks are no longer allowed to offer cardholders credit limits without request, but you should still reconsider whether you really need a credit limit increase. If you struggle to repay your balance each month, a larger credit limit could act as a temptation to spend. Instead, have a look at your finances and narrow down some expenses you can cut back on to avoid having to ramp up your credit limit.
Fingers crossed that a royal commission or ASIC inquiry will result in a push for more ethical bank practices in the near future. Until then, you can use the above tips to take your finances into your own hands.