Soaring bank charges and high interest rates are coming under government scrutiny following revelations in Personal Finance that some banks have increased charges by up to 150 percent this year.
The banks are also under pressure in the courts where they face test cases about whether or not they are entitled to unilaterally change interest rates on home loans.
The question of bank charges was raised in parliament by Finance Committee member Professor Ben Turok and has now been taken up at government level by Trade and Industry minister Alec Erwin.
Turok was alerted to the increases by reports in Personal Finance, published every six months to help you decide whether you are getting value for money at your bank.
The Department of Trade and Industry (DTI) has called for information from the Banking Council and the Consumer Institute to determine whether high bank charges are placing a burden on the consumer and the economy.
The issue of huge increases in bank charges in the wake of hefty profit increases announced by banks over the last few months was viewed with interest and great concern, he said.
The Banking Council admitted that some bank charges had been raised by 150 percent. But on average, transaction charges had been increased by less than 10 percent this year, the council said.
Replying to Turok in parliament, Erwin said there were no legal limits on bank service charges which constitute about 25 percent of bank revenues, but the DTI was examining this in a policy document to be drafted by the end of the year.
Erwin also confirmed that the DTI was looking at developing a new formula for setting maximum finance charges in conjunction with the Reserve Bank, which would take account of the interest margins earned by banks.
At the same time, the Reserve Bank has also commissioned an independent study into bank margins to be undertaken by auditing group KPMG.
John Louw of KPMG says the study will reveal the true profitability of banks and will show whether the perception that banks are ripping off consumers is true or not.
Meanwhile borrowers are anxiously awaiting the outcome of a legal battle in which banks have been challenged for raising interest rates on loans.
Three High Court judgments have declared the increases invalid and a fourth case against the banks was brought this week in the Western Cape. One of these judgments is being challenged in the Appeal Court in Bloemfontein.