- ASIC announced a review of primary school banking programs.
- CBA’s Dollarmite program was recently awarded a Choice Shonky Award for its relentless marketing to children.
- And a Fairfax Media investigation earlier this year found that thousands of children’s accounts were fraudulently set up by retail branch staff as part of a widespread scam to earn bonuses.
Corporate regulator ASIC announced a review of primary school banking programs, including the Dollarmites Club run by the Commonwealth Bank which gave commissions to schools.
ASIC wants to establish “principles for appropriate conduct and good practice” for the school programs which encourage the opening of bank accounts in the name of children who then deposit small amounts regularly.
The upside for banks is that this habit continues into adulthood, thus creating a large deposit base.
The CBA’s Dollarmite program was earlier this month named in Choice’s annual Shonky Awards for its relentless marketing to children.
Dollarmites has been running for nearly nearly 90 years and last year had 346,000 active participants.
The program gives schools a commission of $200 when the first student customer is signed up, and ongoing benefits depending on the number of students and the number of deposits, Choice says.
And a Fairafx Media investigation earlier this year found that thousands of children’s Commonwealth Bank accounts were fraudulently set up by retail branch staff as part of a widespread scam to earn bonuses and meet aggressive performance targets.
ASIC says it is essential young people develop the knowledge and the skills to engage effectively with financial products and services.
Attitudes and behaviours around money can be shaped from an early age and education is a key component to support stronger financial capability and to better prepare young people to manage decisions throughout their life, says ASIC.
The review will look at how bank programs are implemented, how they are marketed to school communities and will assess the benefits as well as the risks.
“Transparency around school banking programs is important,” says ASIC’s Deputy Chair, Peter Kell.
“ASIC wants to understand the motivations and behaviours around school banking programs to ensure they ultimately serve the interests of young Australians, and to enable school communities to have an understanding of the potential impact of these programs.”
A CBA Youthsaver account, targeted at children under 12, pays a standard variable rate of 0.50%, plus a bonus rate of 1.80% if the child makes at least one deposit a month and no withdrawals. It has no account or withdrawal fees.
The Commonwealth Bank welcomed ASIC’s review.
“We look forward to providing information about our involvement and hearing the range of views from other interested stakeholders. CommBank fully supports initiatives that promote financial literacy,” says Executive General Manager Retail Banking Services Mark Jones.
He says CommBank also makes a payment to schools based on the number of participating students, and the frequency of their deposits.
The payments recognise schools’ administrative involvement in the program and the time of around 10,000 program volunteers. So far this year, schools have on average received $500. In most cases these payments generally go towards school sporting equipment or books in the school library.
CommBank is continuing to make changes to the program based on broad-based input from schools, parent and citizen groups and community organisations.
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