*In the frame, a poster for the campaign to abolish current account fees, being run by the Israel Consumer Council, under the slogan "The Banks are Milking Us".
Israel Consumer Council: There is no alternative to legislation to eliminate current account fees, which should reduce household interest payments for banking services
At the beginning of November, the Consumer Council outlined the proposed law to the chairman of the Knesset’s Economics Committee, MK Carmel Shama Hacohen, and the committee’s members. As a result, the committee has agreed to promote the legislative initiative, in cooperation with the Consumer Council.
In a discussion with the Knesset’s Economics Committee, Adv. Ehud Peleg, CEO of the Consumer Council, stated that the main problem in the banking industry is that private consumers are being “held prisoner” by the banks, due to a lack of transparency regarding the cost of banking services, and due to the consumer’s inability to compare charges between the various banks. The charging of fees for basic current account transactions complicates the individual consumer’s ability to compare the costs of the various banking services.
A survey carried out for the Consumer Council by the Geocartography survey company indicated that 79% of consumers had never tried to bargain with their banks over bank fees. Only 20% of bank customers who enjoy fee discounts had obtained them by bargaining with the bank. The vast majority of discounts are given to customers who belong to specific organizations or to the banks’ preferred customer classes. Of those receiving such discounts, the number of higher-income customers is 70% greater than the number of lower-income customers.
The survey also showed that 70% of consumers are unable to make comparisons between the banks in the area of fees and interest rates.
Abolition of current account fees would expose the interest rate gap to consumers, and allow them to compare rates between the banks. This ability to make comparisons would improve the consumer’s bargaining power, and lead to a reduction in interest rates. The survey showed that, if the fees were to be abolished, the number of consumers comparing interest rates on overdrafts would be 4 times the number currently doing so.
850,000 people have already signed a petition, set up on the Council’s website, calling for the Knesset’s Economics Committee to abolish the current account fees.
In 2010 the Consumer Council launched a legislative effort to abolish the current account fees. In an attempt to reach an agreed upon arrangement, the Council tried to enter into dialogue with the Supervisor of Banks, but given his refusal, the Consumer Council has renewed its efforts to have the matter resolved through legislation during the present Knesset session.
Adv. Ehud Peleg, CEO of the Consumer Council: “Current account fees constitute only about 2% of the banks’ income, yet in spite of this the banks have not taken the initiative to eliminate these fees, as opposed to the situation in many other countries. The recent protests over the cost of living did not make the banks wake up and reduce the cost to consumers of banking services. The current account fees are a camouflage net that prevents price comparisons, and are thus an impediment to competition in the household sector. As a result of of the Supervisor of Banks’ refusal to intervene and solve the problem, the solution will have to come through legislation.”