Ethical Issues in Australian Banks Charging Fees for No Service

This essay analyzes the ethical issues raised by Australian banks charging fees for no service and evaluates the most ethical decision. It applies ethical philosophies and ethical decision-making processes to provide a solution.

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Comparative Business Ethics and Social Responsibility

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The article posted by The Sydney Morning Herald will be analysed in this essay to identify
the key ethical issues which are raised in the article. The title of the article is
“'Unreasonably delayed': Banks hit again over fees for no service” which was posted on
March 11, 2019. This article was written by Sarah Danckert in which she highlighted the
issue of Australian banks that charged fees on their customers without providing any
services. Danckert (2019) provided that the issue which is raised is whether some of these
cases might be considered as ‘criminal’ offences or not because in some cases the
officers of the banks were aware of these practices still they did not take actions to stop
these practices. Commonwealth Bank (CBA) is a major player in this issue which has
imposed most charges on its customers without providing them any services; however,
other banks such as National Australia Bank (NAB) and AMP are also gaining popularity in
this list (Danckert, 2019). The Australian Securities and Investments Commission (ASIC)
provided that these institutions are taking substantial time in completing their review to
make sure that they work along with government regulators to speed up remediation
programs. Danielle Press, the ASIC commissioner, provided that these reviews are being
unreasonably delayed by these institutes which show their unwillingness to pay back to the
customers (Danckert, 2019). This essay will evaluate the ethical issues raised in this
article and evaluate whether the most ethical decision has been made. This essay will also
apply principles of ethical philosophies in this case and also provides an ethical solution
through ethical decision-making processes.
There are a number of ethical issues which are raised in this article as a result of the
failure of Australian major banks to fulfil their social responsibilities. Social responsibility is
referred to an ethical framework which provides that the corporations and individuals have
an obligation to act for the benefit of society at large (Cheng, Ioannou and Serafeim,
2014). In order to comply with their social responsibilities, companies have to make sure
that they comply with the principles of corporate governance which is defined as a set of
rules and practices which enable organisations in identifying the impact of their operations
in stakeholders and implement policies to make sure that they maintain a balance between
their interests (Claessens and Yurtoglu, 2013). CBA and other major Australian banks
have failed to comply with these guidelines since they imposed charges on their customers
without providing them any services. These banking corporations have also implemented a
corporate social responsibility (CSR) structure which is a self-regulatory model that
enables these companies to become more socially accountable towards itself,
stakeholders and the public.

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The CSR structure provides that these corporations should focus on prioritising the interest
of their customers above profit maximisation; however, they have not complied with these
policies (Lanis and Richardson 2012). In most times, the banks and their officers were
aware regarding the charges which they were imposing on their customers; however, they
did not stop those operations, and they were not held accountable for such violation as
well. As a corporate citizen, the company owes duties towards its customers, and those
duties were violated because of the illegal operations of these banks (Chau, 2019).
Furthermore, these banking firms are also ‘unnecessarily delaying’ the reviews in order to
pay remediation to their customers which shows the failure of compliance with ethical
leadership principles. Due to a violation of these policies, these corporations have raised
various ethical concerns relating to imposing unnecessary fees on customers, failing to
conduct a review on time and repaying the customers on time as well.
Currently, the most ethical decision has not made in this scenario since the banking
corporations that are involved in this case have not faced any legal consequences, and no
accountability or penalty is imposed on their officers who were aware regarding these
practices. This can be justified by the Kantian ethical philosophy which emphasises on the
duties of parties while deciding the ethical outcome of a scenario. The Deontology
(Kantian) ethical theory provides that parties should not engage in any practices which
result in violating their duties even if those actions have positive consequences (Taylor,
2014). In this case, the banking corporations violated their legal and ethical duties towards
their customers by levying fees on them without providing them any services. They also
violated their duties by failing to quickly repay their customers based on which their actions
are unethical. Another relevant ethical philosophy that applies in this scenario is
Consequentialist or Utilitarianism ethical theory which emphasises on consequences of
actions while determining the morality of a situation. This theory provides that actions
should focus on achieving greater happiness for a maximum number of people to be
considered as ethical (Burnes and By, 2012). The decision taken by Australian banks
imposed high fees on their customers resulted in violating their rights. The companies
have not taken corrective steps to repay these customers which show that they have
violated the principles of this theory and their actions are not considered as ethical.
In order to make an ethical decision, in this case, the steps of ethical decision making
process can be applied. The first step focuses on identifying ethical concern. The
imposition of fees without any service and unnecessarily delaying in paying those dues is
the ethical issues presented in this case (ASIC, 2019). The second step is the collection of

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relevant data. In most cases, the officers of these banks were aware that customers are
charged without any services; however, they did not take any actions, and they are
delaying the review. The third step is the evaluation of the information. The decision taken
by the officers to avoid terminating the collection of fees from customers without providing
any services was made to increase the profitability of the organisation at the expense of
customers (Letts, 2018). The review is being delayed because the banks did not want to
repay their dues to the customers. The fourth step focuses on considering the alternatives
in the scenario. The first alternative is that the ASIC strictly imposes penalties on these
corporations and enforces them to quickly repay their debts by handling the review by
itself. The second alternative is that banking corporations comply with their CSR principles
to make sure that they make an ethical decision in this scenario through which they fire
those officers that engage in these practices and repay their dues without any delay (Wu
and Shen, 2013).
The fifth step focuses on making a decision. In this scenario, the second alternative is the
most ethical decision in this scenario. This is an ethical decision because it will enable
these organisations to fulfil their social responsibilities and comply with the principles of
corporate governance to make sure that they did not engage in the illegal practice. This
decision also complies with the principles of the Deontology ethical theory because it will
allow the banking firms to make sure that they comply with their duties (Dion, 2012). In this
decision, the provisions of the Utilitarianism ethical approach is also followed because it
achieve greater happiness for the maximum number of people since the interest of
customers of these banks will be fulfilled. The sixth step is implementing the decision. This
solution can be implemented by making changes in the CSR structure of these
corporations to make sure that they are able to promote accountability on their leaders and
increase transparency in their operations which will allow them to act in an ethical manner
(Danckert, 2019). The seventh step focuses on reviewing the action. The review of these
actions can be conducted by issuing a periodical CSR statement by the company to make
sure that it provides information regarding these policies.
In conclusion, the article highlighted many ethical concerns in relation to illegal practices of
major Australian banks that impose fees on their customers without providing them any
services. In most cases, the officers were aware of these practices; however, they did not
take any steps to stop these practices. The ethical concerns raised in this case are
analysed based on the principles of the Utilitarianism and Deontology ethical theory to
determine that an ethical decision is not made in this case. The corporations have violated

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corporate governance, social responsibility and ethical leadership guidelines by failing to
act in a reasonable manner. The ethical decision making process is implemented in this
case to evaluate an ethical decision in the case. It is recommended that Facebook should
change its CSR structure to focus on the interest of its stakeholders and prioritise the
privacy of its users to make sure that their data is not violated in the future.

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References
ASIC. (2019) Fees for no service: Remediation. [Online] Available from:
https://asic.gov.au/regulatory-resources/financial-services/giving-financial-product-advice/
fees-for-no-service-remediation/ [Accessed on 14th May 2019].
Burnes, B. and By, R.T. (2012) Leadership and change: The case for greater ethical
clarity. Journal of business ethics, 108(2), pp.239-252.
Chau, D. (2019) Commonwealth Bank to stop 'fees for no service' for most customers.
[Online] Available from: https://www.abc.net.au/news/2019-02-04/asic-orders-
commonwealth-bank-to-stop-charging-financial-fees/10776870 [Accessed on 14th May
2019].
Cheng, B., Ioannou, I. and Serafeim, G. (2014) Corporate social responsibility and access
to finance. Strategic management journal, 35(1), pp.1-23.
Claessens, S. and Yurtoglu, B.B. (2013) Corporate governance in emerging markets: A
survey. Emerging markets review, 15, pp.1-33.
Danckert, S. (2019) 'Unreasonably delayed': Banks hit again over fees for no service.
[Online] Available from:
https://www.smh.com.au/business/banking-and-finance/unreasonably-delayed-banks-hit-
again-over-fees-for-no-service-20190311-p513ap.html [Accessed on 14th May 2019].
Dion, M. (2012) Are ethical theories relevant for ethical leadership?. Leadership &
Organization Development Journal, 33(1), pp.4-24.
Lanis, R. and Richardson, G. (2012) Corporate social responsibility and tax
aggressiveness: a test of legitimacy theory. Accounting, Auditing & Accountability
Journal, 26(1), pp.75-100.
Letts, S. (2018) CBA hit with another $335m blow as fee-for-no service scandal widens
and downsizing costs mount. [Online] Available from: https://www.abc.net.au/news/2018-
12-12/cba-costs-rise-by-another-335-million/10608818 [Accessed on 14th May 2019].
Taylor, D.F. (2014) Defining ubuntu for business ethics–A deontological approach. South
African Journal of Philosophy, 33(3), pp.331-345.

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Wu, M.W. and Shen, C.H. (2013) Corporate social responsibility in the banking industry:
Motives and financial performance. Journal of Banking & Finance, 37(9), pp.3529-3547.

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Appendix

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