Regulator ASIC is going to examine the Commonwealth Bank of Australia (ASX: CBA) Dollarmites program.
Dollarmites is a Commonwealth Bank-funded initiative to teach school kids about money.
Why the ASIC investigation?
Primary school-based financial literacy programs like Dollarmites have been attracting a lot of negative attention. It was revealed that thousands of accounts were wrongly opened by staff to achieve sales targets and receive bonuses.
Consumer advocacy group Choice recently awarded Commonwealth Bank’s Dollarmites program a ‘Shonky’ award for using marketing to advertise to school kids. The rewards by CommBank to schools include:
- Commissions including a one-off payment of $200 when the first student makes their initial deposit
- Annual rewards of up to $600 a year
- Ongoing payments of $5 for every 10 deposits per student
It’s important for Commonwealth Bank because research from Choice shows that 46% of people open their first account with the bank and then subsequently 35% of people don’t close their first account.
Choice CEO Alan Kirkland said: “Under the guise of education and community service, the Commonwealth Bank has been grooming successive generations of customers for decades.”
ASIC will now look at how school banking programs are designed and marketed, including how they affect students’ future banking habits.
ASIC deputy chair Peter Kell commented, “ASIC wants to understand the motivations and behaviours around school banking programs to ensure they ultimately serve the interests of young Australians.”
This is now yet another part of Commonwealth Bank that is under scrutiny after facing the spotlight in the Royal Commission.
The Commonwealth Bank of Australia share price is down 0.57% in early trade.
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