The Gillard government has announced that they will introduce a new program that will allow customers to switch bank accounts without the need to change details of billing, salary, mortgage payments and deposit accounts.
This is a great initiative as many people simply do not change banks due to the hassle associated with switching over their direct debits.
In practice this may be difficult to implement as the bank systems may find it hard to cope with such changes. We expect that there will be a lot of technical difficulties and lost transfers in this process. However should this work effectively it will be a big win for all Australians who are fed up with terrible service form their bank.
It should be noted that this program will only cover cheque and savings accounts. The switching process of credit cards and other accounts will still have to be completed manually.
We recommend that if you are going to switch lenders then it would be best to switch over your direct debits manually so that there are no lost funds or declined direct debits.
Since the governments ban on mortgage exit fees, there has been a slight increase in refinancing of home loans. Refinancing your home loan is now easier, more affordable and there is more competition between lenders allowing you to get a lower interest rate as well.
You can learn about switching banks on our refinancing a home loan page.
Below is the article from the Sydney Morning Herald.
“BANK customers who want to move savings accounts from one institution to another will no longer have to do the administrative heavy lifting of changing direct debit and credit details.
From July 1 next year, the Gillard government will introduce a new ”tick and flick” program which will allow customers to switch bank accounts without the added complication of having to change the details of billing, salary, mortgage payment and deposit accounts.
The move follows early signs that the government’s ban on mortgage exit fees has sparked a slight increase in refinancing of home loans, although most customers were still choosing to switch between the big banks than move to a smaller lender.
Under the new arrangements, customers will be required to sign just one form that authorises the previous bank, credit union or building society to transfer the details of all automatic transactions linked to the customer’s savings account to the new institution.
The Treasurer, Wayne Swan, will announce the new initiative today as well as the introduction of a mandatory one-page fact sheet that aims to help consumers understand the costs and benefits of lenders’ mortgage insurance when they take out a home loan.
Home owners will be able to compare quotes side-by-side, including the difference in premiums and rebate schedules.
Mr Swan will also announce a National e-Conveyancing System to provide a single online portal for property sales which is aimed at helping reduce the costs associated with loan applications, property valuations, settlements, property title searches, and registering mortgages.
The measures act on recommendations made by the former RBA governor Bernie Fraser who was commissioned by the government to report on the viability of bank switching for Australian consumers.
Mr Swan will today release the full report, Banking Services: Cost-Effective Switching Arrangements, and accept his recommendations in full.
The government intends to set up a Treasury working group who will investigate whether the ”tick and flick” service should be extended to small business customers.
The Treasurer said the latest measures were designed to help Australians get the maximum return from their savings.
”Between work and family life, it can often feel like you just don’t have the time to go through the hassle of moving all your automatic debits and credit,” he said. ”That can mean missing out on a better deal on your savings at a time when family budgets are tight.”
But the shadow treasurer, Joe Hockey, said increasing the regulatory burden on banks would see associated costs passed on to customers as higher fees and interest rates.
”Australians deserve a comprehensive approach to banking reform, instead of this knee-jerk, ad-hoc and piecemeal approach offered by the government,” he said.
”The Coalition repeats its call for a full inquiry into Australia’s financial system to deliver Australians more freedom, fairness and flexibility in their day-to-day banking requirements.”
Source: Sydney Morning Herald 21/08/11