March 2018

The Nation Reviewed

Held to account

By Russell Marks
Held to account
Why is the cost of banking in remote communities so high?

Wugularr, also called Beswick, is a remote community on Jawoyn land, about 90 minutes’ drive east of Katherine in the Northern Territory. Until the mid 1990s, it was common for locals to do their banking with passbooks at the community’s Australia Post outlet, which was authorised as an agent for the Commonwealth Bank of Australia. But privatisation saw CBA withdraw its services from (unprofitable) remote communities. Now there’s a single ATM inside what the locals call the new store, opened with much fanfare in 2015.

The “big four” banks offer fee-free accounts, but they have lengthy forms and require identity papers many people don’t have. Their “security questions” (What’s the name of the first street you lived on? What is your mother’s middle name? What was your childhood phone number?) make no sense in remote communities. Then there’s the curious resistance displayed by some Katherine branches to serving people from the surrounding communities. One particular bank’s fee-free account, which the bank’s call centre and product disclosure statements say is available to all customers on Centrelink incomes, mysteriously isn’t available to particular customers in the Katherine branch.

Commuting from Wugularr to Katherine is not straightforward, especially for Astrid, a single mother of three in her 30s. Astrid doesn’t have a car or a licence. She can get lifts with family or friends if they’re going into town, but then she’s dependent on their timetable – and often they don’t have room for her kids, who go everywhere with her. The not-for-profit Bodhi Bus, which is what passes for public transport in the region, runs twice a week from Wugularr and costs $60 each way per passenger. Often it’s cheaper for Astrid and her family to simply get a taxi, which can be a $400 round trip. In the wet season, Wugularr can get cut off completely.

It was remoteness and big four bureaucracy that led traditional Yolngu owners on Milingimbi Island – off the Arnhem Land coast – to establish the Traditional Credit Union (TCU) in the mid 1990s. TCU has since opened branches in 12 other remote communities throughout the Top End, and has ATMs in a handful of others (though not Wugularr, yet). It employs more than 50 locals in those communities, and has trained dozens more to Certificate II and III levels.

Astrid has banked with TCU for more than a decade. For the past few months she’s been working with Emily, a Katherine-based social worker who was confused about why Astrid was running out of money for food and electricity towards the end of each week. The two sat down with Astrid’s bank statement in October last year. During September alone, Astrid had been charged $145 in ATM and bank fees. In August, it was $167. In July, Astrid was charged nearly $278 just in bank fees.

Most Australians don’t read their bank statements every month, but financial illiteracy only goes some way to explaining how Astrid and others in the NT’s remote communities can pay $200 a month in bank fees on Centrelink incomes. A quick glance at the TCU fee structure (which is freely available online) takes us further. Astrid’s “Everyday” account costs her $5 every Friday just in service fees. It costs her $2 every time a transaction is declined at an ATM, $3 to take money out of a non-TCU ATM (such as the one in Wugularr), and $2 every time she simply makes an EFTPOS purchase. When her account is overdrawn, TCU takes another $20. If she needs staff to help her make a transaction over the phone, she’ll pay at least $6.50 – and up to $50 an hour.

ATM fees in remote communities were the subject of multiple reports some years ago. One by the Australian Financial Counselling and Credit Reform Association in 2010 led to a Reserve Bank–brokered agreement to scrap ATM fees in remote communities. TCU was never party to that agreement, though at the time of writing it is hoping to be very soon. But ATM fees are only the tip of the iceberg.

Like many in Wugularr and surrounding communities, Astrid has a lot of direct debits. Businesses regularly push these onto people in communities, ostensibly as a way of bypassing regular debt, which isn’t available to them – but also to keep them consuming. One whitegoods retailer in Katherine urges people to bring in their Centrelink income statements to set up $10 or $20 weekly payments via Centrepay. It then keeps that money in store-held accounts. The intention is to help locals buy fridges and washing machines. In practice, these accounts are often used to pay for cheap replacement mobile phones.

Centrepay’s original purpose was to help people on low incomes manage utility bills. A rapid expansion of “approved businesses” has led to much criticism and numerous reviews, but no government action. Astrid talks about clothing outlets that use Centrepay to help customers “book up” purchases, often in the hundreds of dollars. “I don’t do book-ups anymore,” she says. “Last time the girl in the shop wanted me to keep buying, keep paying, and I couldn’t say no.”

For people with very little disposable income, Centrepay and direct debits take huge chunks out of their weekly pay, so there’s often not enough left for food and bills. And every time a direct debit is dishonoured due to a lack of available funds in their account, Astrid and other TCU members are slugged $30.

TCU director David Knights, also general manager of a big four bank, acknowledges that TCU’s fees are steep. But even he’s surprised at the fees Astrid has been paying. Why are they so high in the first place? There’s a trade-off, Knights explains, between offering services people in remote communities need – like instant card replacements and specialised identity proof for people who often don’t have birth certificates – and ensuring TCU is a going concern. The fees come back to what Knights calls the “disordinately high costs” of providing financial services in remote communities, to cover cash-handling (including flying cash in and out of communities), training for TCU’s local staff, and IT.

“And we’re different to the main banks, because we don’t have huge customer deposits to then lend out and derive income,” Knights says. TCU’s net interest income last financial year was just under $134,000; CBA’s was $17.6 billion. “We have a very small lending book, and there’s a much lower capacity for our members to be able to borrow.” With the federal government’s NT Intervention from 2007 came the BasicsCard, on which up to half an individual’s Centrelink income is quarantined so that it can’t be withdrawn as cash (and spent on grog, ganja and porn, went the government’s justification). Overnight, TCU’s asset holding (and income-earning potential) was slashed in two.

A world away, the banking industry is gearing up for the royal commission. Most Australians in cities and towns pay nothing for their everyday accounts. In remote communities like Wugularr, people need accounts because Centrelink won’t pay into anything else. Astrid is worried about what she pays in fees, but she isn’t accustomed to imagining she can change what institutions do to her. “Money sometimes runs out, because when my family comes to my house I like to feed them,” Astrid tells me. “But I still have no furniture in the house.”

Russell Marks

Russell Marks is a lawyer and an adjunct research fellow at La Trobe University. He is the author of Crime and Punishment: Offenders and Victims in a Broken Justice System (Black Inc., 2015). 

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