Playing Hide and Seek / *Ehud Peleg
70% of respondents to a survey, conducted for the Consumer Council, were unable to determine in which of two banks it would be better to maintain a checking account.
The theory of intelligent consumerism advocates obtaining information, comparing alternatives, bargaining over price, and making intelligent choices.
Intelligent consumerism is an essential condition for the growth of competition, and it rewards businesses that are honest, high in quality, service-oriented and inexpensive (in terms of the return obtained for one’s money).
Within Israeli corporate culture, there are those who would seek to interfere with the growth of such competition, among other things by creating obstacles to intelligent consumerism. The banking sector is a concrete example of this.
The banks, through their checking account fees, have created a smokescreen that prevents consumers from making comparisons between the various banks in terms of interest differentials (the difference between the interest rate on overdrafts or loans and that on deposits or credit balances).
In a survey conducted at the initiative of the Consumer Council, it was found that 70% of the consumers were unable to determine in which of two banks it would be better to maintain a checking account, after being presented with data on the banks’ checking account fees and interest rates. This fact imposes an unneeded cost on consumers, in the sum of hundreds of millions of shekels each year.
The same survey also looked at the reasons for which consumers make price comparisons: 65% of respondents said that, if checking account fees were removed, and thus would no longer interfere with such a comparison, they would start to make comparisons based on interest differentials.
Checking account fees are, therefore, an obstacle that prevents consumers from doing what they ought to be able to do: bargain for the best price.
Consumers should have a “toolkit,” one that includes the ability to make comparisons and, on that basis, to bargain. The key to this consumer toolkit today is in the hands of the legislature:
In the past, the Consumer Council has called on the Supervisor of Banks to remove this obstacle. However, his response was there was no problem with bank fees.
As a result,
the Council has moved for the Knesset to pass legislation, promoted by a number of Knesset committee chairmen, to regulate this issue, and thus improve the ability of consumers to make comparisons between banks and bargain with them.
As a continuation of the trend toward improved consumer awareness, the time has come to put an end to the banks’ game of hide and seek.
* Adv. Ehud Peleg is CEO of the Israel Consumer Council
