About the 2008 Bank Fees Reform

​On July 1, 2008, a comprehensive bank fees reform went into effect, considerably reducing the number of fees that banks may charge their customers for various transactions.
Under the new reform, the Banking Supervision Department drew up a standard and binding list of bank services for which banking corporations may charge fees. The lengthy list of fees that existed until July 2008 was thoroughly  reviewed; after meticulous examination of all the banking services and the fees that were assessed for them, a new list, shorter and much more transparent, was put together.

Legal background of the bank-fees reform

The Banking Supervision Department at the Bank of Israel drafted recommendations to encourage competition in the banking system and to give the Department various powers to control the prices of banking services. The recommendations were adopted by a parliamentary investigative commission that was active in this matter in the first half of 2007. Following this, the Banking (Customer Service) Law (Amendment 12), 2007 granted the Bank of Israel and the Banking Supervision Department powers relating to banking corporations’ fees. Under the main power conferred by the law,the Banking Rules (Customer Service) (Fees),2008 were enacted, setting forth a price list in which a standard list of services for which banking corporations may charge customers was determined, as well as short price lists in three main consumer fields—current accounts, housing loans, and credit cards. Finally, rules were set forth about how the banks must inform their customers of the fees and the price lists.​

Powers invested by law to the Bank of Israel and the Banking Supervision Department

The main power that was given is the right to determine a standard and explicit list of banking services for which banking corporations can charge their customers. The Banking Supervision Department was empowered to reduce the number of such fees considerably. In addition, the Bank of Israel was allowed to intervene in the prices of banking services (when the legal grounds for this are present) and to stimulate competition in the banking system by publishing comparisons for the public to see.​

Purpose of the reform

The purpose of the reform is to enhance competition in the banking system by assuring greater transparency in bank fees. The assumption is that by enabling customers to know how much they are paying for banking services and making it easier for them to compare prices, they will be encouraged to negotiate for the improvement of the terms and, where necessary, to switch to a bank that offers them the best terms. Wiser consumerism by customers in regard to bank fees will allow the process of improving the terms offered to them to continue.​

Important changes that occurred due to the reform

Four important changes took place due to the reform:

  • The number of fees for consumer services was reduced to around one-third by combining some fees and canceling others.
  • All banks must use the same names to describe the same services.
  • All banks use the same methods to collect most fees.
  • The common fees (for current accounts, housing loans, and credit cards) are listed together on short price lists to make them easier to check and compare.​
Important changes relating to current accounts

Before the reform, fees were in effect for 15 routine transactions in current accounts. After the reform, the price lists show only 2 fees for all routine transactions—one for a direct transaction (a transaction performed by the customer him/herself, either online or using a call center or an automatic machine) and one for a teller transaction. It is important to remember that transactions such as making or withdrawing a deposit, taking and paying back a loan, or buying and selling securities entail neither a teller transaction fee (even if they take place at the branch) nor a direct-transaction fee.
After the reform, the current-account records show only 2  types of transactions—direct and teller—and 2 different fees that are made on account of them. Customers who perform few transactions in their accounts may see in their account records a supplemental fee to the minimum management fee that the bank lists on its price list. Customers who do not have cash-withdrawal cards, senior citizens, and persons with disabilities who present the bank with certification from the National Insurance Institute or the Ministry of Defense that they are disabled at 40 percent or more, may carry out four teller transactions per month at the price of one direct transaction.​

Important changes relating to credit facilities

Before the reform, two fees were assessed for credit facilities (in addition to interest)—one for drawing up the documents and another for allocating the credit. Pursuant to the reform, the former fee was canceled and the latter fee applies only to customers who do not use their credit facilities. ​

Important changes relating to loans

Before the reform, two fees were assessed (in addition to interest on the loan)—one for drawing up the documents and another for collecting the loan. Pursuant to the reform, the former fee was canceled on loans up to NIS 50,000 and the latter fee was canceled altogether (both of which with the exception of housing loans).​

Important changes relating to credit cards

Before the reform, the cost of holding a credit card was divided among three fees—a monthly management fee, an annual limitation of liability fee, and an annual membership fee. Today, credit card companies charge a single management fee called the “monthly card fee.” It is charged on a monthly basis; the credit card companies give discounts and exemptions on a monthly basis under criteria that they determine. Several supplemental fees were also canceled.​

To which customers does the reform apply?

The reform applies to any customer who is defined as an “individual customer” and to corporations defined as “small businesses.”

Individual customer:
An individual customer is any private customer other than a corporation (even if he or she is an authorized dealer).

Small business:
A “small business” is one of the following:

  1. an entity that represents the tenants in a condominium dwelling. (This does not obligate such an entity to pay management fees on a business account.)
  2. a corporation in its first year of incorporation.
  3. a corporation that presented the bank with an annual statement showing that its business turnover in the year preceding the submission of the statement did not exceed NIS 1 million in the year beginning in the month after it submitted the statement. Not included in this provision are corporations established under law and companies in which all shareholders are corporations that are not “small businesses.”

Additional Information on Fees