Trending Financial News 10 July

The big bank “tax on households” revealed

The big four banks have withheld the equivalent of eight separate rate cuts since the global financial crisis, more than doubling the margin between bank funding costs and their retail loan interest rates.

Between 1997 and the global financial crisis beginning in 2007, the bank’s average­ standard variable home loan interest rate maintained a 1.8 percentage point gap over the RBA cash rate. Recent RBA rate cuts in June and July 2019, have pushed the gap out to more than 4.0 percentage points according to analysis of RBA data in The Australian newspaper.

A recent report by The Productivity Commission found that competition was not working to prevent banks passing on costs to their customers.

“It is a giant tax on households,” one bank analyst told The Australian.

Small personal loans charge up to 990%

Small personal loan providers are charging borrowers up to 990 per cent per annum for borrowing small amounts of money, as small as $50.

Two Gold Coast based personal loan providers, Cigno and Gold-Silver Standard Finance have been named by the government regulator as the first targets of its new powers to intervene where lender’s products or actions are causing “significant consumer detriment.”

The Australian Securities and Investment Commission says some small lenders use an associate to issue two credit contracts both charging fees that when combined equal an interest rate of up to 990 per cent per year.

ASIC’s Sean Hughes said the regulator had received many complaints from consumers about this type of lending but had only recently been granted the power to intervene.

Mr Hughes is asking Australians to report other firms issuing these type of credit contracts charging very high fees on small amounts of money.

Compare reputable personal loans from Australia’s banks, credit unions and non-bank lenders at InfoChoice.

Are Facebook comments official bank complaints?

If you get upset about your bank not passing on interest rate cuts to your home loan and rant a bit on Facebook, is that an official bank complaint?

Banks could be forced to treat Facebook comments and Twitter raves as official complaints requiring dispute resolution. The Australian Securities and Investments Commission is investigating the ways banks and other financial institutions treat customers who complain via social media, instead of other avenues.

The regulator has been concerned that financial institutions make complaining easy and accessible to all consumers.  Banks have been quick to respond to social media comments for many years but never have they treated these comments as official complaints that could end up requiring compensation or other forms of remediation. The regulator has issued a discussion paper asking questions like where the line should be drawn between consumers making generally negative comments ‘about’ their bank and customers with a specific incident or grievance requiring resolution.

Credit cards are giving away Virgin Velocity points

Right now, credit cards are offering up to 120,000 bonus Virgin Velocity points to lure new customers. Competition is heating up in the rewards credit card market following big changes to the Qantas Frequent Flyer program in June. American Express’ Velocity Platinum Card has 120,000 free points to give away to new approved applicants (terms and conditions apply). Virgin Money’s Velocity High Flyer Card has a zero per cent purchase rate for the first 14 months. Find out more about the top five credit cards for Virgin Velocity points at InfoChoice.

Beware low or no-fee car loans

Many car loans have fees, charges and balloon payments that may not be readily apparent to the borrower. There are four factors that determine the cost of a car loan:

The amount of the loan (loan size)

the interest rate

the term of the loan

various fees and charges at the start and throughout the loan.

The most common car loan fees and charges are:

  • The application and establishment fees
  • Annual or monthly fees (not all loans feature these)
  • Early repayment fees
  • Missed or late payment fees, and
  • Documentation fees

Balloon payments are not strictly a fee but are repaying the remaining principal and interest on the loan in one big lump sum.

Research car loans and compare the fees lenders charge. Establishment fees range from $0 to $500 and monthly fees could be between $0 and $25. If you’re late with a payment you could pay between $5 and $60 and if you pay the loan off early you could face up to $300 in penalties. Use a loan calculator to work out what loan size you can afford and what you can afford to repay. Read more about car loan fees and charges at InfoChoice.

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