Thai banks urged to come clean on fees

[Admin]

Thai banks urged to come clean on fees 
Bangkok Post: 24 Apr 2010
Banks urged to come clean on transaction fees

Regulations designed to protect customers may actually be stifling competition,

Consumers cry foul about hefty bank fees and charges for financial products.

For many, however, an even worse crime is that banks charge the same fees for some services.

How can they charge the same fees when they are supposedly competing with each other?

"I feel that banks take advantage of us. They make these arbitrary rules and we're forced to live with them," says customer Narumon Mekborisut, 39.

Her family suffered a hike in credit card interest rates of 15%, she says.

They missed payments several times and were charged a 13% default rate plus a collection fee of a few hundred baht each time.

The condition on collection fees was stated in contracts but they hardly noticed it.

She is also upset about charges for transactions.

"I have to perform several transactions every month and I end up paying fees for inter-bank or inter-provincial money transfers via ATMs or at the counter," she says. "I'm not convinced the fees reflect actual costs.

"Banks never tell us how much they'll charge before we process transactions.

"Nor do they tell us about their fee structures before we choose certain products and services," she says.

"This means we are unable to compare fees among different banks."

Thailand has 33 local and international commercial banks. Last year, the industry made a net profit of 92 billion baht, according to the Bank of Thailand, the state regulator. Most comes from lending interest and fees.

This year, local banks have reported "impressive" growth for the first quarter, with significant year-on-year increases in interest and fee-based income.

The issue of whether the industry's fees and charges are excessive and reflect actual costs of operation has prompted calls for change.

The Ministry of Justice has asked the central bank to consider reducing its ceiling rate for credit card interest which allow banks to charge their customers up to 20% annually.

The central bank, however, has not budged. Eight leading banks now charge the same ceiling rate.

Banks are still allowed to impose debt collection fees.

Economist Duenden Nikomborirak, of the Thailand Development Research Institute (TDRI), believes the regulation on ceiling rates has resulted in banks charging the same amount - the maximum - for credit card interest.

The economist, who recently released a study on competition in interbank electronic services and charges, says consumers are generally overcharged for electronic services such as ATM withdrawals, money transfers or electronic deposits. Fees for these services do not reflect costs.

"Electronic services may involve huge costs at the beginning of an investment. But after that marginal costs should begin to decrease and eventually be reduced to almost zero," Ms Duenden says.

Her study finds that all banks impose the same 25 baht rate - the ceiling set by the BoT - for interbank money transfers via ATMs.

"There is no competition among banks. In my opinion, it suggests an act of collusion," she says.

If no such BoT regulation was in place, banks would strive to offer better deals for customers.

Banks also charge customers 50 baht per month for maintaining accounts which stand idle for a year. Interbank ATM withdrawals cost five baht a transaction at all banks.

"Despite the large number of banks offering services, all offer the same rates," she says.

"It is the only industry in Thailand that I have seen applying this sort of standard."

The BoT and the Thai Banks Association, however, are being forced to revamp fees for payments and credit transfers following a request by Finance Minister Korn Chatikavanij who addressed the issue after the TDRI study was revealed.

But Ms Duenden expects little to change. Banks will likely argue electronic transaction fees subsidise free services like over-the-counter transactions.

The central bank should reveal the actual costs of bank operations for which they charge consumers, she says.

"I sense that banks make good profits from electronic service fees which are a new source of income for them," Ms Duenden says.

"Consumers should be informed about all fee structures before they sign up for bank services. Fees should also reflect actual costs."

http://www.bangkokpost.com/business/economics/36543/banks-urged-to-come-clean-on-transaction-fees