ANZ Bank, along with Commonwealth Bank, NAB, and the Westpac-St. George Group, is slashing penalty fees charged to banking customers, to the tune of $750 million collectively.

New legislation, taking effect in January, allows customers to challenge the amount of penalty fees charged for overdrafts, dishonours, and late payments. Mindful of this, and also aware of the overall unpopularity of such fees, the Big Four banks have initiated reductions that are estimated to strip as much as $500 million from their collective annual profits.

ANZ is partially offsetting this reduction by raising the monthly service charge for their basic retail transaction account by $1. However, it’s estimated the reduction to their bottom line will total approximately $140 million.

Estimates from the Reserve Bank of Australia placed the overall amount of such penalty fees charged to banking customers at $1 billion in 2008, most of which simply increased the Big Four’s profits. The lowered fees recently announced by all four should cut that level roughly in half.

NAB’s new fee schedule takes effect this month. Those for Commonwealth and Westpac-St. George come into play on 1 October, while those for ANZ begin 15 December.

The new schedule of fees for ANZ gives biggest benefits to account holders with an ANZ Access Basic account, which includes those on government benefits and others with low incomes. For these customers, the new schedule includes no penalty fees at all for overdrafts, dishonoured payments, being over the limit, or late payments.

For other account holders, the overdrawn fee for amounts below $50 will be scrapped. For higher amounts and for dishonoured payments, the fee will be reduced to $6 from the current level of $35.

For credit cards, fees for spending over the limit and that for late payments falls to $20 from the current $35.

In all, 27 fees are abolished and more are reduced. The monthly service fee for the Access Advantage account, the main ANZ retail transaction account, is being raised to $6 from $5, to partially offset the lost funds.

Source: SMH : ANZ joins queue to cut penalties for disgruntled customers