ACCC to probe whether banks use saver’s profession to determine interest rate

The competition regulator will test whether banks and other lenders use a person's profession, or other demographic information, to determine what savings rate they receive, amid growing concerns over pricing practices.

The Australian Competition and Consumer Commission (ACCC) has opened its inquiry into retail deposits for submissions, and will assess the criteria banks use when making rate decisions.

"One of the aspects we are directed to look at is the interest rates paid, including with reference to differences between customer segments," ACCC chair Gina Cass-Gottlieb told Guardian Australia.

"We are looking to test this in a lot of detail now."

She said the regulator did not have a preliminary view on whether a person's age, job or other attribute affected the rate they received.

Any adverse findings against the banks and other institutions could prove damaging for a sector that only recently emerged from a scathing royal commission that exposed numerous poor practices.

The Australian Banking Association chief executive, Anna Bligh, said the regulator had been tasked by the federal treasurer to determine how savers were benefiting from a higher interest-rate environment.

"Australia's banks look forward to assisting the ACCC with its inquiry and contributing to the discussion as part of the submission process," Bligh said in a statement.

Concerns over pricing have re-emerged in recent months after the country's biggest lenders posted bumper profits by increasing interest on their loans at a faster pace than on deposits.

The regulator said Australians hold over $1.45tn in savings, transaction or term deposits.

"For many Australians, the interest earned on these accounts is an important source of income, and consumers are understandably keen to ensure they are receiving a good return on their savings," Cass-Gottlieb said.

The inquiry process comes as households grapple with rising costs for everything from food to rents, while wages growth remains weak.

The Reserve Bank instituted 10 consecutive cash rate rises dating back to May 2022 in an effort to slow spending to combat inflation. The central bank paused its hiking cycle in April, leaving the official rate at 3.6%.

"While increases in the cash rate have generally been passed through to interest rates on variable rate home loans, the interest rate increases for retail deposit products have often been smaller or conditional," the ACCC said in a paper released on Friday.

As part of the inquiry, the regulator will assess how banks and other lenders make decisions on rate setting, and whether there is adequate competition for deposits. It will also look into whether there are impediments for customers to switch to a rival institution for a better rate.

The ACCC is accepting submissions until 19 May, with a focus on hearing from consumers as well as financial institutions. It is scheduled to make its recommendations to the government late this year.