School banking programs like the Commonwealth Bank’s Dollarmites program are next to go under the corporate watchdog’s microscope.
The Australian Securities and Investments Commission (ASIC) announced on Thursday it will begin a review into school banking programs in primary schools.
The announcement comes just weeks after the Commonwealth Bank’s school banking program was named one of Australia’s most “shonky” products by consumer advocate group, CHOICE.
“The Dollarmites program uses slick marketing to target primary kids at school, turning them into long-term customers of a bad-value bank,” CHOICE CEO, Alan Kirkland said at the time.
“CHOICE has found that 35 per cent of Australian adults still have their first bank account and this brand attachment often means they take out credit cards, home loans or other products with the same bank,” he continued.
The Commonwealth Bank was also found to have paid the Queensland Department of Education nearly $400,000 to sign up students to its school banking program, as the Australian Broadcasting Commission reported.
However, the Commonwealth Bank said its school banking programs are voluntary, with an emphasis on building regular savings habits.
To ASIC deputy chair, Peter Kell, clarity around the programs is a critical factor.
“Transparency around school banking programs is important,” Kell said today.
“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.”
The review will focus on the implementation of school banking programs, how they are marketed and the long-term student outcomes of these programs.
It will also assess the benefits and risks of school banking programs, and will set out principles for appropriate conduct.
“It is essential that young people develop the knowledge and the skills they need to engage effectively with financial products and services,” ASIC said.
“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 financial decisions throughout their life.”
The corporate regulator said it expects the review will be completed by mid next year.