A surprise entrant in the worst bank of the year stakes is Citi. Most banks would be happy to leave it to the big banks to fight it out, but Citi has made a late bid for infamy by increasing its home loan rates last week.
The bank has form. In October it put up credit card interest rates. And in an Australian Financial Complaints Authority report issued last month, Citi shows up with a relatively high number of complaints and a poor record in dealing with them.
Last week, Citi became the first bank in more than six months to hike standard variable rates for owner occupiers. It increased rates on new standard variable loans for owner occupiers by 23 basis points to 3.19 per cent and in the process wiped out most of the pricing relief it created for new borrowers after the RBA’s official cuts in July and October.
Citi’s five-year fixed rate has been ratcheted up 25 bps to 2.99 per cent for owner occupiers and by 20 bps for investors.
Citi passed on only 15 bps of the RBA’s 25 bps cut in October and only 18 bps of the 25 bps cut in July.
The bank began applying the hike to new mortgage applications from December 4. Existing borrowers will not be affected.
In October, Citi increased purchase rates on its credit cards from 20.99 per cent to 21.49 per cent. The cash advance rate on all cards rose from 21.74 per cent to 22.24 per cent.
The only card not affected was its Clear Platinum Card, a low(ish)-rate offering with a purchase rate of 12.99 per cent.
At the time, Citi told comparison site Finder: “There are many factors taken into account when deciding the interest rate on a credit card. These include profitability and the cost to service the product.”
Citi also pointed to the fact that it has introduced instalment payments as a way of managing payments, allowing customers to convert their account balance to a fixed-rate instalment plan at a lower rate.
Last month, the Australian Financial Complaints Authority released data on complaints against financial institutions. Eighty-six per cent of AFCA’s 37,488 members did not have a complaint lodged against them.
Citi had 1385 complaints, which put it in the high category. It also had a “non-response” rate of 37.8 per cent. The non-response rate is the percentage of complaints that progressed to the case management stage of the complaint resolution process without a response from the financial services company at the initial stage.
In other words, Citi attracted a relatively high level of complaints and did a pretty poor job of dealing with them before it was forced to.
Citi’s actions over the past few months have exposed it as a greedy company and a poor corporate citizen. Consumers can do better than bank with this mob.