How Banks Failed Consumers During COVID-19
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How Banks Failed Consumers During COVID-19

Trudie Cross

Trudie Cross

26/03/2021 • 7 minute read

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The big four banks, namely – Commonwealth Bank, Westpac, NAB, and ANZ haven’t been the most trustworthy institutions in the eyes of the general public. According to the quarterly Trust Index survey for March 2020, the big four banks are among those considered least trustworthy.

One of the main reasons for this is due to recent controversies that have severely impacted the reputation of each bank. The same trust index ranked Westpac, 29th. The other three major banks were clustered together with NAB ranked at 22nd, Commonwealth Bank at 23rd, and ANZ at 24th.

Some controversies in recent years:


In November 2019, Westpac was accused of more than 23 million breaches in relation to transactions worth more than $11bn.

23 million breaches came from people making online purchases or receiving a pension from a foreign country. Banks worldwide use a messaging network called SWIFT (Society for Worldwide Interbank Financial Telecommunication) to transfer funds between banks.

According to ASIC, Westpac thought this system was costly and slow and instead used a cheaper and quicker approach. Owing to a technological error that apparently went undetected for years, Westpac did not report 19.5 million IFTIs (International Funds Transfer Instructions) to Austrac.

Commonwealth Bank

In October 2019, Commonwealth Bank faced 87 criminal charges over practices in its life insurance arm — CommInsure. CommInsure had been charged with “hawking” for trying to sell life insurance products through unsolicited phone calls.

ASIC (Australian Securities and Investments Commission) alleged that between October and December 2014, CommInsure provided its agent telemarketing firm, Aegon, customer data information from the CBA existing customer database. The calls to CBA customers were unsolicited and did not comply with all of the hawking exceptions in section 992A (3) of the Corporations Act.

NAB (National Australian Bank)

In December 2019, NAB was taken to court for breaking the law more than 10,000 times in its ‘fees for no service’ scandal. According to the royal commission, the ‘fees for no service’ scandal allowed NAB to take away around $650 million from customers who weren’t expecting ongoing services. NAB continued charging these fees without service even when they knew there was no service and that didn’t stop until February this year.

Overview of the ‘fees for no services scandal’

All four big banks were at some point accused of this same scandal.

A fee for no service is the failure to deliver ongoing advice services to financial advice clients who were charged fees for those services. This outlines the failure to deliver an annual (or other periodic) advisory review that was promised to a client.

ANZ (Australia and New Zealand Banking Group)

In January 2020, three bushfire survivors joined Friends of Earth in a claim against ANZ, accusing it of financing the climate crisis by funding fossil fuel projects.

ANZ was accused of misleading consumers by claiming to support the Paris Agreement targets while continuing to invest in projects that funded fossil fuel projects. ANZ has lent AUD$8.76 billion to the fossil fuel sector and expansionary projects, enabling the emission of 2.8 billion tonnes of CO2. Its investment in coal has increased 34% over the last 2 years and is the largest fossil fuel financier of the big four Australian banks.

What steps were supposed to be taken by banks during COVID-19?

With all the above controversies, banks were held accountable to take required steps to mitigate the impacts of COVID-19 on everyday consumers.

The Australian Banking Association (ABA) is an entity consisting of 22 member banks in Australia. The ABA includes the four big banks, regional banks, and international banks that have an Australian banking license.

The ABA announced that certain measures would be taken by each bank during COVID-19. Here is an outline of every measure:

Personal Assistance

Banks were expected to defer payments on home loans for up to 6 months. Moreover,  personal assistance was to be provided to individual consumers in the form of waiving fees, restructuring loans, etc.

Business Assistance

The business assistance relief package included loan deferments and SME loan guarantee schemes where loans were to be provided at very low-interest rates.

Landlord Assistance

Since 90% of commercial property owners have loans with the banks, this relief package included loan deferments to prevent landlords from evicting small businesses.

What support was given to the big banks during COVID-19?

During COVID, the RBA announced a term funding facility for the banking system. Banks had access to at least $90 billion in funding at a fixed interest rate of 0.25 percent. This measure was taken to reduce funding costs for banks, to then help reduce interest rates for borrowers.

What were the actions implemented by the big four banks?

According to CHOICE, here were the actions implemented by all the big four banks:

Bank CHOICE Fairness Score Actions Implemented
Westpac 59% Offered a 3-month pause on repayments and interest for credit cards and personal loans

Had a program to help people with long-term credit card debt

Offered a fairly low-rate card of 9.9%, but also has the most expensive credit card of the big four at 20.49%

NAB 53% Had established a program to proactively assist people with long-term debt.

Lowered interest on low-rate credit card to 12.99%, but charged customers 21.74% on balance transfers after six months

Failed to pause interest on loan repayments for all people in hardship

Commonwealth Bank 47% Had a fairly low-rate credit card of 9.9%, but many customers paid up to 20.24%

Failed to pause interest on loan repayments for all people in hardship

Switched people to minimum mortgage repayments without consent meaning they will pay more over time

ANZ 46% Had a program to help people with long-term credit card debt

Failed to pause interest on loan repayments for all people in hardship

Offered new credit card customers 0% on balance transfers then increased the rate to 20.24%

The running theme through each of these actions is that they didn’t do enough to pause interest rates on loan repayments. Westpac was the only bank that made the decision to not charge interest rates on personal loans and credit cards which is why they had a higher fairness score. However, they also offer the highest interest rate credit card in the market as compared to all the four big banks.

How did CHOICE measure the fairness score?

Each bank was ranked according to the following criteria:

COVID payment pause score:

CHOICE took a look at each of the hardship policies available to consumers. They checked if each bank offered payment pauses for people in hardship that did not capitalise on interest rates on mortgages, credit cards, personal loans, and other such credit products.

Fair credit card score

Each bank’s range of credit card offerings was measured including interest rates and balance transfer rates. CHOICE also reviewed whether there had been any decrease in interest rates in response to COVID-19.

Proactive hardship assistance score

CHOICE reviewed each bank’s effort to identify and assist customers with long-term debt. They also checked to see if every bank had an existing program to assist people with high-running debts.

Royal commission scores

Finally, they also reviewed each bank’s public position on the passage of the royal commission reforms and looked for evidence of a re-commitment to the reforms.

So, according to their analysis, all banks except Westpac managed to capitalise during a pandemic with high-interest rates. However, interest rates have always been a running issue with big banks, especially when we consider credit card rates.

Interest rates on credit cards have always been historically high. How does that impact everyday Australians?

According to CHOICE, while the cash rate now stands at historically low levels of 0.25%, credit card rates have barely budged in response to this fall.

Above all, if credit card rates moved in line with cash rates, Australians would have paid $6.3 billion less in interest since 2011 according to Mozo.

What actions should banks take to regain trust from consumers?

CHOICE has suggested the following measures that need to be taken by banks:

  • Refund interest accrued on deferred loans for all people in financial hardship. It is unfair to everyday consumers that banks weren’t expected to lower interest rates on all their credit offerings.
  • Cut exorbitant interest rates on credit cards to reflect the historically low cash-rate environment.
  • End the sale of harmful balance transfer credit cards.
  • Waive debts for people with long-term debts.

With trust scores low, each bank’s response to COVID-19 would’ve helped them win back everyday consumers. This wasn’t the case. Even though additional assistance from RBA was given to the banks in the form of lowered interest rates, all but one bank did not pause interest rates.

If you’d like to sign the petition by CHOICE to hold banks accountable during COVID-19, sign here.

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Trudie Cross

Written by Trudie Cross

Trudie Cross is a contributing writer for Oiyo. She has worked in a variety of content and communications roles across the technology sector. Trudie holds a Bachelor of Communication and Media Studies from the Queensland University of Technology. In her spare time you'll either find her reading a book or riding the streets on her bike.

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