Why are Big Four Banks in the ACCC’s sights?

Ross Greenwood speaks to Chairman of the ACCC, Rod Simms, regarding their agenda for 2018 and the big four banks are at the top of the list.

Introduction: Why are Big Four Banks in the ACCC’s sights?

Ross Greenwood:  I want to take to something also that’s important to your hip pocket and that is the work of the Australian Competition and Consumer Commission. Over the course of the past 12 months, there’s been a range of inquiries and even penalties imposed upon businesses that have done the wrong thing, either by consumers or in terms of exploiting their own businesses from a competition point of view.

Rod Sim has been adamant that that’s not going to go on. Today he’s laid out to the committee for economic and development in Australia basing the way in which his priorities would work for 2018 and there’s some really big ones here. Let’s get him on the line right now. Many thanks for your time, Rod Sims.

Interview with: Rod Simms, ACCC, Chairman

Rod Sims:  Good day, Ross.

Ross Greenwood:  I want to take you through some of these. One of the things that you wanted to investigate is mortgage pricing. You’ve started an inquiry into, not necessarily whether there’s collusion, but whether in fact the coincidence that many banks do have similar pricing of their mortgage products, whether that is simply coincidence or whether that is organized, shall we say?

Rod Sims:  Yes, Ross, we’re certainly looking at how banks make their decisions on mortgage pricing, how they differentiate between new and existing customers, and really just how competitive the market is, and how they trade off the interest of their customers and their shareholders. Looking at it from a range of ways, Ross, and we’ll have a report out in very early March on that.

Ross Greenwood:  Okay, but there’s already been other works that’s been done by APRA, looking at culture and particularly with the Commonwealth Bank. Part of that culture is also looking at much of what you’re looking at there, whether in fact the profit to the shareholders is taking precedents over the products and the pricing to the customers. Of course if there’s insufficient competition in the banking industry or if customers have somehow locked into their banks for whatever reason, it means there would be less pressure on the pricing aspects of those organizations.

Rod Sims:  Absolutely, Ross. You’re right, there’s the traditional financial regulators, APRA, ASIC and Reserve Bank involved heavily from a financial stability point of view and increasingly looking at competition aspects as well. Our focus is really only about competition and we’re really coming at it from one particular direction. The other thing, Ross, is we can use our information gathering powers to look at bank decision making in ways that others can’t. That’s the particular value we have using our investigators and our information gathering powers.

Ross Greenwood:   Would you really hope ultimately that the pricing of mortgages could be more dynamic in the future? There are plenty of other alternatives however the big four banks do have 80% market share of mortgages, give or take, here in Australia. But there’s plenty of other alternatives if people want them for some reason, clearly only 20% of the market goes to those smaller alternative lenders.

Rod Sims:  Those are issues we’ll certainly be looking at, Ross, as our work. We now got a permanent role looking at the financial services sector and looking at competition. As part of that permanent role, we’ll certainly be looking at the ease of customers switching and what the barriers are and of course if the Treasurer’s recent announcement on open banking can help there. But also just what are the barriers to those other players, be they second tier banks or be they new FinTech making a much better fist of challenging the big four.

There’s a lot to get on top of and these are– What we’ll be doing is very focused: how do we lower the barriers to entry, how do we get customers switching. A complete affordability focus, if you like, a complete competition focus. It’s a narrower focus I think, Ross, than those other regulators. Hopefully we can get somewhere on those hugely important issues.

Ross Greenwood:  Okay, let’s go to another one of your priority and that priority is car dealerships, and the way which in particular new cars are sold. You’ve already had a bit of a go here, in regards to some of the other things that are sold, insurances that might be out there, tyre and rim insurance for example was one that’s been looked at in the past. Where do you see this focus going?

Rod Sims:  ASIC have looked at some of those things. Our focus is in two areas, Ross, and we’ll keep this focus up. One of them is when there’s something wrong with your car, are you just dealt with by the dealer through the warranty, or are you also able to get access to your rights under consumer law, your consumer guaranteed rights.

The best example of that, Ross, is there’s something systemically wrong with the car and under the warranty they keep fixing it five, six, seven times you keep taking it back. It could be that under the consumer guarantee rights you’re entitled to a new car, or a replacement car, or a refund. Or your warranty might have expired, but you still got your consumer guarantee rights. We want to make sure that happens.

Secondly, we want to make sure that the independent repairers can get the same data to repair your car as the manufacturers provide the dealers, so we just get a more competitive market for servicing vehicles. We don’t want a situation where your only choice is to take it back to the dealer and pay whatever price is prescribed there.

Ross Greenwood:  Okay. The final one I want to concentrate on because it’s another one that you’ve already been looking and taken action about. That is the speed of in particular National Broadband Network broadband speeds. This is a key to so many people and also the services they receive. In this end, which way would you go with this over the course of the next 12 months?

Rod Sims:  I think Ross, what we’ve done is got undertakings from the major companies that they will check what speed the NBN is capable of delivering, particularly fibre to the node, see whether it can in fact deliver 50 or 100mbps service or NBN 25, although it should do that. If the NBN can’t deliver the service they’re selling you, they’ll drop you down to a service that can be provided.

We’ve got that out of the way, that means in future it’s a really important turning point. In future if you’re not getting the speed that you were sold, it’s now because the retailers aren’t buying enough capacity of NBN. Previously, there’s this ping pong game, it’s your fault, it’s your fault, it’s your fault. Was it the NBN’s fault or the retail of services providers. Now we’ve dealt with the NBN problem, we now move on to the retail service providers, are they buying enough capacity. That’s going to be our focus, Ross.

Ross Greenwood:  That’s going to be interesting for people to check their broadband speed to make certain that they’re getting what they paid for. The Chairman of the ACCC, will be watching those plus other key issues over the course of the next 12 months, lay that out on the speech today and as always, Rod Sims, we appreciate your time in the program.

Rod Sims:  No, thank you, Ross. Thanks for your interest. Good–




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