Gloriavale leaders say some banks are refusing to serve customers they deem to be “undesirable”.
Purporting to represent religious minorities, Māori, rural, disabled and elderly members of society excluded by the banks, leaders of the 580-strong religious community are headed to the Commerce Commission to take on the banks.
“Whether the role of moral arbiter is one that should be assumed by those providing a necessary service such as a bank is highly questionable,” they say.
Gloriavale leaders say some banks are segmenting customers into “desirable” customers versus “undesirable” customers by way of self-imposed and self-regulated internal guidelines.
They are already in a court battle with BNZ, which closed the community’s accounts following an Employment Court ruling that three former members – who began working at the community from age six – were employees rather than volunteers. This month the High Court granted an order to continue an existing injunction preventing the bank from terminating Gloriavale’s 83 accounts.
Now, in its submission to the Commerce Commission inquiry into retail banking competition, Gloriavale leaders say their community relies on both online banking and in-person branch services located in Greymouth.
Sectors of the community, such as rural communities along with the elderly and disabled, are being disadvantaged by the closure of face-to-face services.”
– Gabrielle O’Brien, Rural Women NZ
“The community members belong to minority population groups in terms of their religious beliefs and rural location an hour’s drive from the nearest banking branch services. The community includes people who identify as Māori although these are a minority,” they say.
Attempts to close their accounts, including the withdrawal of credit card access, affects 17 named individuals, including some suffering from disabilities, who are elderly and have limited access to transport.
There are also general bank accounts operated by the community for the benefit of those within it, including accounts for the school, for medical care, for food and for clothing and for the charitable trust that owns the land and buildings.
“Finding alternative banking arrangements is not easy – and in some cases may prove very difficult or impossible particularly if a customer is deemed to be ‘undesirable’.”
The leaders’ submission says banks assert an unconstrained ability to terminate banking services for any reason, even if alternative services are not practically available. “That has the effect of increasing the isolation and vulnerability of those who rely on access to banking services to participate in everyday society,” they say.
“In many cases, the reasons for a customer being undesirable also make that customer more vulnerable. Those who (for example) have unstable home addresses, poor credit, live in remote locations with inconsistent or no internet access or who have criminal histories risk falling outside the banking net.”
They are not alone in their concerns.
‘Severe financial exclusion’
Rural Women NZ chief executive Gabrielle O’Brien submits: “Sectors of the community, such as rural communities along with the elderly and disabled, are being disadvantaged by the closure of face-to-face services.”
And Fincap, an umbrella organisation supporting 190 financial mentoring services, reports the difficulty of some New Zealanders in getting bank getting bank accounts, like those going through an insolvency or leaving prison.
“Without practical and timely access to a bank account whānau can face severe financial exclusion or be put at significant risk of economic harm or other forms of fraud,” says chief executive Ruth Smithers.
“This can arise because a person is unable to receive government administered or wages income. Without timely access to a transaction account there can be far more logistics involved in paying bills and higher risk of incurring late fees or penalty interest that contribute to debt spirals.”
Financial mentors in rural areas have at times resorted to driving whānau they are supporting more than 100km to branches to get access to banking services.
Faced with criticism from other excluded groups like former bankrupts and prison inmates, Māori and the elderly, the big banks are promising to “urgently” step up their support for vulnerable groups.
Rural Women NZ is asking that the banks’ maintain smaller branches and improve their digital connectivity; others like Gloriavale also argue that everyone should have the legal right to a bank account.
According to the commission’s preliminary issues paper, NZ has one of the most “banked” populations in the world. Ninety-nine percent of New Zealanders aged 14-plus have a bank account – but that leaves the remaining 1 percent particularly exposed.
‘Scared to death’
After the Canterbury earthquakes, bookkeeper Lisa Cowe’s business struggled. The final straw was collection agencies demanding repayment of a $6,400 credit card debt owed to her bank.
“I have heard others say they get threatened by debt collectors,” she says. “The threat of a bankruptcy on its own is enough to scare some people to death, literally.”
She was one of nearly 1900 people bankrupted in 2017. And for those who hoped it might be a chance to start anew, they were bound for disappointment. When Cowe was bankrupted, her banked closed her account; even when she was discharged from bankruptcy, a series of banks refused to take her on a customer.
Now, she’s setting up a support group for people who have been bankrupted – and she’s put in a submission to the Commerce Commission’s banking inquiry. She argues the whole system needs an overhaul but as a first step, everyone should have the right to hold at least one transactional bank account, to access and use their own money.
In submissions published yesterday afternoon, the Australian-owned banks lay out their initial responses to the competition study into the retail banking sector.
It comes after Finance Minister Grant Robertson said record-high profits had raised concerns. “At a time when New Zealnders are struggling with their cost of living I think it is reasonable for people to say, are we getting a fair deal here?”
The commission, in its preliminary issues paper, says the New Zealand banking sector – especially the Big Four – appears to have persistently high profitability compared to other countries.
Finally, the banks respond…
The big banks dedicate most of their submissions to disputing the scale of their profits – indeed, three of them have commissioned economic consultancies to present alternative analyses.
But, acknowledging concern about financial exclusion, they also spend some time laying out what they’re doing to help paroled prisoners, Māori, rural and elderly people, and what more needs to be done.
ANZ, the country’s biggest bank, acknowledges distinct challenges causing financial exclusion for Māori, including standardised rules around use of credit reports, the difficulties of certain models of land ownership, geographic barriers and proximity to local branches.
It acknowledges the impact of bank branch closures, and has developed ‘banking hubs’ and smart ATMs that accept cash deposits. A person in Gore can access the same pricing as someone in Auckland, it says.
It also describes its ongoing relationship with Age Concern to help them support older customers, including by funding training in use of digital channels. “We have established systems to ensure that our contact centre staff can take the necessary time and care when supporting older customers, particularly with self-service enquiries.”
In particular, ANZ says it’s changing its risk appetite and policies to enable Māori to leverage and better use collectively-owned land. “Financial institutions in NZ must continue to work to rebuild trust with Māori.”
Westpac says banks need to provide additional support to customers who are more susceptible to harm, loss or disadvantage. “To enable everybody to fully participate and engage in New Zealand society, it is essential that the potential barriers to servicing these customers are urgently addressed.”
BNZ cites its dedicated economic and domestic violence banking team, and initiatives to protect consumers who are experiencing vulnerability and to minimise financial distress, like its partnership with interest-free lender Good Shepherd. “BNZ is committed to disrupting high cost, predatory lenders.”
And ASB has introduced a ‘community council’, chaired by chief executive Vittoria Shortt, representing potentially vulnerable customer groups.
But it admits there’s more that must be done to support vulnerable consumers to access financial services. It’s exploring using technology to simplify sign up processes for particularly vulnerable customers, recognising that verifying identities and keeping authorised signatures can result in difficulties for those caring for other individuals.
Despite the banks’ assurances, there are mounting calls to ease regulatory hurdles and anti-competitive barriers like the big banks’ mortgage broker incentives and home loan cashbacks.
Entrepreneur Tex Edwards, who heads the Monopoly Watch group, is calling on the commission to recommend the break-up of the two biggest banks, ANZ and ASB.
He points to a report from ratings agency S&P Global: “In our view the industry structure is an oligopoly dominated by four large banks,” the agency said last year.
Lisa Cowe agrees. The banking system holds a lot of control and power over people, she says.
“Today I am always on guard – I have lost a lot of faith in not only the banking sectors but the Government as well, because they are well aware of the issues but they simply won’t address them.”