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Connexus : Issue 42
Competition in banking has taken another hit, after the Australian Competition and Consumer Commission decision that the Commonwealth Bank's takeover of Aussie Home Loans does not give rise to a “substantial” lessening of competition. The ACCC says Aussie brokers make up only around 6 per cent of Australia's mortgage brokers and there are many other distribution channels through which lenders can access brokers and borrowers. However, Abacus senior manager, public affairs Luke Lawler says the ACCC's decision does not address the growing problem posed by the major banks' multi-branding strategies, which the Abacus Balance Banking campaign continues to raise. "The ACCC's decision actually highlights that CBA can use the 'Aussie' mask to attack smaller competitors in the market for borrowers who may wish to avoid the major banks. "The ACCC's statement about the decision underlines our concerns on the multi-branding and consumer confusion," says Lawler. The ACCC statement said that the "Commonwealth Bank is likely to have the ability and incentive to increase the volume of, for example, 'white label’ home loan products (fnanced by Commonwealth Bank and rebranded as Aussie Home Loans) supplied through the Aussie Home Loans network”. Abacus has consistently held the view that major bank multi-brand strategies are intended to lure customers who don't want to bank with a major bank. The big bank sub-brands also seek to compete on price against genuinely independent competitors without providing any beneft to the bulk of the major bank’s existing customers. Confusion over ownership Consumers should be spared from having to comb through fne print to see who they are actually banking with, says Lawler. The infor mation that Aussie Home Loans is wholly-owned by the Commonwealth Bank should be clearly displayed on all consumer documents. "Our research as part of the Balance Banking campaign shows just how confused people are about big bank ownership of these brands,” says Lawler. Aussie now joins Bankwest as a CBA sub-brand rather than a genuine competitor. Westpac’s sub-brands include St George, BankSA, Bank of Melbourne and RAMS. NAB has UBank. Abacus members support the call for greater transparency, including requiring major bank sub-brands to prominently disclose in all advertising and all customer-facing material that they are owned by a major bank. Damien Walsh, managing director of bankmecu points to "growing concern that the major banks are creating a veneer of competition through their ownership of various sub-brands”. Heritage CEO John Minz says the multi-branding strategy creates a "false impression among customers that there is a high level of competition in the marketplace, but in reality a number of these so-called competitors are actually part of the big banks themselves”. As Abacus has noted in its submission to the ACCC, better disclosure of the real identity of lenders will ensure a better informed market, more empowered consumers and more accountability for the major banks to the vast bulk of their borrowers who do not beneft from the pricing discounts they offer via sub-brands. "Consumers deser ve real choice but in reality they are just getting the illusion of choice. Achieving and maintaining competition in retail banking is only possible if consumers can distinguish between the major banks and their sub- brands, and other competitors like those from our industry,” Lawler says. Concerns over Aussie ruling A recent ACCC decision deals a blow to banking competition. Our research shows just how confused people are about big bank ownership of these brands. Luke Lawler, senior manager, public a airs, Abacus NEWS 10 Connexus