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Unclaimed bank accounts: Coalition set to scrap Labor policy

Date

Jonathan Swan, Fergus Hunter

EXCLUSIVE 

The federal government will reverse Labor's policy of taking money from people's "unclaimed" bank accounts after just three years. 

The policy, designed in 2012 when former treasurer Wayne Swan was keeping alive his promise of delivering a string of budget surpluses, has angered consumers who found their money had vanished from savings accounts after what they considered a short period of inactivity. Interviews conducted by Fairfax Media last week quoted elderly people who were shocked to discover their savings had been taken by the government. 

Senior government sources said the Coalition was now certain to scrap Labor's three-year policy, which collected $520 million in 2012-13. 

The question being debated is how long an account should remain dormant before the government intervenes. A period of either five or seven years is considered most likely, but the government will reserve judgment until Finance Minister Mathias Cormann finishes consulting with consumers and the banking sector. 

Opposition Leader Bill Shorten, who was financial services minister at the time of the change, stood by his policy on unclaimed savings, pitching it as a consumer protection measure. So did shadow treasurer Chris Bowen, though he acknowledged one concern. He said Labor had written to the Australian Securities and Investments Commission – which collects the "unclaimed" savings – to ask why "it is taking so long for some consumers to claim their money back". Mr Bowen blamed this on the government's budget cuts to ASIC. 

"This is about protecting people's savings to ensure it's not eroded by bank fees and changes," Mr Shorten added. 

But several Labor Party members were privately embarrassed about the policy. One frontbencher thought the the period was still seven years. Others wished Mr Shorten would stop feeling beholden to a policy designed in financially troubled circumstances. 

An opposition frontbencher compared the policy to the Gillard government's "wrong" decision to cut welfare payments for thousands of single mothers.

The Coalition has been critical of the policy since it was announced. Senator Cormann called it "bad policy" made by a government "desperate for more cash because they made such a mess of the budget". 

He released a discussion paper last month and said he had "received a lot of feedback from people right across Australia who are very unhappy about this attack on their bank accounts". While the consultation period remained open, the Coalition was committed to undoing the policy. While this would have the enthusiastic backing of banks, consumer groups were divided. 

Consumer advocacy group Choice supported Labor's position.

Spokesman Tom Godfrey described the account collection as "a good thing for consumers whose funds are in products with high fees that can eat away at the balance of an inactive account". 

But Katherine Lane, principal solicitor at the Financial Rights Legal Centre, disputed that view. She warned people not to "assume that all bank accounts are charging tonnes of fees because I think that has improved in recent years. Fee erosion is an issue but I do think in many cases it is just a furphy."

Ms Lane also condemned the lack of notice required from the government or the bank, saying "you can't be going to the bank and your money's just gone, it's an enormous breach of trust." 

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