[What they’re not telling you is how the ANC’s racial laws are driving up the costs of all businesses.

And, even worse, wait until that completely insane, NATIONAL CREDIT BILL comes into being in 2006 which will drive up the fines and bad debt of the banks. We’re in for a fun ride as the ANC now sticks its grubby little paws into our financial sector and really stuffs things up. Jan]

A financial shock awaits South Africans in the new year when banks are expected to increase their charges yet again.

South Africans are already paying among the highest bank charges in the world and now the national Treasury Department says it wants to meet with banks early in 2006 to discuss the high bank charges and other issues.

Banks in countries like Britain do not levy bank charges on customers whose accounts are in credit, but in South Africa banks charge for almost every transaction.

Customers extremely unhappy
Here it is estimated that close on 60 percent of banks’ profits are generated by bank charges.

First National Bank has already implemented new fees, Standard Bank has announced increased rates for next year and the other major banks are expected to soon follow suit.

The Banking Ombudsman’s manager of complaints, Logan Balakrishna, has admitted that bank charges in the country are already “incredibly high”, with customers extremely unhappy.

Earlier this year the spotlight fell on the life assurance industry which has been charging high penalties for policy cancellations.

Penalty practices in the industry have seen retirement annuity fund members and policyholders losing millions of rands.

Banks reward customers with high bank balances
Government stepped in recently and told the industry to pay back close to
R3 billion to policyholders. Now consumer groups believe it is time for the government to bring banks in line and to cap their charges.

For years South Africans have been paying among the world’s highest interest rates on borrowed money. Although the recent dip in the inflation rate has seen an accompanying drop in interest rates, banks have continued to push up their fees for services.

In many cases people with the smallest savings and those with the least money in their accounts have been those hardest hit by the charges.

Banks reward customers with high bank balances – making them pay the smallest amounts in bank fees. But those with small savings fork out bank fees that are so high that many literally cannot afford to put money in the bank.

Research released this year showed that 80 percent of the country’s lowest-income earners and 60 percent of low-income earners are not able to afford bank accounts.

Thoraya Panday, spokesperson for the national treasury, said the department had received numerous complaints and proposals regarding various bank-related issues when it examined competition in banking.

“Bank charges were just one of the issues brought to light by various stakeholders. The issues of high bank charges were highlighted in the joint SA Reserve Bank/National Treasury study on competition in banking, which made a number of policy recommendations,” she said.

“These proposals continue to be investigated, with a view to engaging with the banks in early 2006.”

The so-called Falkena report, named after chairman Dr Hans Falkena, which was delivered to the treasury in August 2004, has never been released to the public.

In the report the authors noted that South African bank charges were higher than all the countries surveyed by them, except Australia. The Falkena report found that South African charges were 142 percent higher than charges in Canada, and current accounts were more expensive than in any of the other countries studied.

A Cosatu proposal was submitted to a parliamentary hearing on bank charges, microlending and the Usury Act in 1999 and presented to the Portfolio Committee on Trade and Industry that highlighted excessive charges, but nothing came of it.

The trade union federation noted that banks were able to make billions of rands from bank charges each year because the fees are unregulated.

The Usury Act exists but this deals primarily with charges levied on moneylending, credit and leasing transactions and does not regulate charges levied on account holders.

Registrar of the Usury Act, Jeremiah Mela, said the act did not regulate service or other fees that banks may levy for transactions that are not in connection with moneylending, credit and leasing transactions.

“The fee is charged for rendering a service and it is therefore not regulated in terms of the Usury Act,” he said.

Balakrishna admitted that there were no rules on banking charges.

“It relates to a commercial decision taken by independent businesses. It falls outside our jurisdiction,” he said.

He admitted that fees and charges were a sore point.

“The fees are incredibly high and consumers feel their money is eaten up by them. But it is a touchy point. Different banks apply different rules and concessions. They each have their own policy of charging and we can’t tell them what to do. Whether they decide to levy a fee in respect of a service or not is up to their own discretion.”

Most banks charge customers a deposit fee when they are paying money into their accounts – even when this is payment to their home loans accounts, which means that what you pay each month does not all go into paying off the bond: some of it goes to the bank as a fee.

If you bank a cheque, you are charged for the service, if you make a withdrawal at an ATM, the costs mount up – there is a transaction fee on stop order payments, electronic transfers, balance inquiries. In short you need extra cash to stay banked.

A comparison of entry level banking accounts in 2004 showed that if a fictitious account holder were to deposit R500 once, with 11 further monthly deposits of R100 over a year, and withdrew R250 three times and one other amount once, the account holder would come out at the end of a year with less money than they had put in – in every instance except one. The deficit ranged from -4.4 percent to -19.49 percent.

Even the Mzanzi account which the major banks introduced after the Falkena report – and which was heralded as being specially aimed at accommodating the poor who wish to transfer money safely from one area to another – is expensive.

Fees range from Nedbank’s R15 flat rate for an account-to-cash transfer and R17.50 for a cash-to-cash transfer, to the Post Office’s R108.50 for transfers of between R1 500 and R5 000.

First National is charging R17.50 for the first R300 transferred and Absa’s fee is R17 for the first R100.

The competition commission is currently conducting an investigation into the banking industry, including service fees, following complaints lodged with it.

This article was originally published on page 1 of Cape Argus on December 18, 2005

Source: Independent Online (IOL)
URL: http://www.iol.co.za/index.php?set_id=1&click…/p>