I’ve been following the bank fees issue with some interest.
First, because the NDP caucus dug up an easily understood, populist issue for once, only to see it fall flat thanks its semi-articulate leader.
Then, because the Canadian Bankers Association‘s defence of the fees for electronic banking is so embarrassingly thin. There’s competition in the Canadian personal banking market? Please. This is the best laugh I’ve had all month:
Competition and consumer choice are the hallmarks of Canada’s financial services industry. […] On ABM access alone, banks compete with each other, other financial institutions and independent operators, through two ABM networks – INTERAC and The Exchange Network – vying for the business of institutions and customers.
I’m betting the flack who wrote that had to do some websurfing to find out what the name of the Interac “competitor” network was.
The CBA’s executive summary of the issue is even better:
The pay-for-use system is a common practice among
other businesses and governments of all levels.
Businesses, including banks, charge for the services
that they deliver. In addition to taxes, governments
at all levels also charge fees for services, for example:
•An extra $10 to pick up a Canadian passport
instead of having it sent to your home.
•In Ontario, a $1 convenience fee for self-serve
purchasing of a vehicle validation sticker
through a ServiceOntarioKiosk.
•In the City of Ottawa, a $33 fee to change the
name on your water bill.
I’m not quite sure what the thinking was here. If it’s to show how reasonable it is to collect fees from customers or, as government knows them, taxpayers, I’m not sure it works. If, on the other hand, the idea is to align bank fees — transaction fees for the unavoidable transactions one makes from one’s bank account, such as paying bills, depositing, transferring, and withdrawing funds — with objectionable and infuriating surcharges, generally widely disliked by the public — mission accomplished!
Thoughtfully, the CBA sums up what the preceding list was supposed to show in a concluding bullet point with a menacing subtext:
•Our pay-for-use system means that, unlike some
other banking systems, Canada does not bury the
price of services in the price of credit or other products
and services.
No, no, you don’t bury the price of services in the price of credit or other products and services — you just, as you’ve just told me, charge me twice!
(I also like the use of “Canada” to represent “banking system”. “Canada” on its own generally refers to the federal government — yet another sly way the CBA’s brief tries to align its industry with acceptable government practices.)
After a complaint from American Express in 1996, the Canada Competition Tribunal made recommendations that led to the Interac network being opened up to more members and being moved to a cost-retrieval model. However, the Tribunal also provided for the original charter members to earn back their initial investment in the switch technology, estimated t be $16.8 million, less fees collected to that date.
Now, the Interac Association collects fees from its members, which cover its operating costs. The members charge fees and surcharges, a fraction of which cover the fees they pay to Interac. Generally, you pay whether you’re in the branch or at the machine. If you don’t pay a per-transaction fee, you pay a monthly fee for unlimited transactions. And if you’re not paying anything, the money that’s sitting in your account is earning paltry interest while it’s being lent out at a rate three times higher.
And all that would just be common sense and the story over, if it weren’t for an inexplicable comment thread on the Globe and Mail. If you’re unfamiliar with the commenters on the Globe website, prepare yourself. You’ve never met a more pinched, angry, self-righteous group of malcontents in your happy life. They blamed babies for not planning ahead for their passports. And here, they’re falling over themselves to defend the banks in their battle against lazy, demanding customers who don’t realize that ATM fees are good for them.