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Parliamentary Committee says banking fee probe not a witch-hunt

BY ALICIA DUNKLEY WILLIS Senior staff reporter dunkleya@jamaicaobserver.com

Monday, February 03, 2014    

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THE Economy and Production Committee of Parliament has insisted that the decision to scrutinise the fees charged by banks was "not a witch-hunt", while at the same time berating financial institutions for the high costs associated with transactions conducted electronically and especially at automated machines.

During the meeting at Gordon House last Tuesday, chairman Karl Samuda noted that the Consumer Affairs Commission has been highlighting bank charges from as far back as 2008.

"I know that there are some who may be apprehensive about the approach we will adopt and I just want to assure everyone here that this is not about any kind of witch-hunt against the banking community or the financial institutions. It is just an attempt to unearth the facts and relate those facts to the present situation that confronts the country and the impact that the banking fraternity has on our economy and the creation of growth that we so badly need," Samuda noted.

The BOJ, in response to a request by Parliament last November that it produce a full report on its survey of fees and charges by banks, has provided an interim report and requested time to produce a full report.

In a review of that interim document which was presented to the Committee Tuesday, the Consumer Affairs Commission said a comparative analysis of current fees as at November 2013 showed that of the five major banks, the Bank of Nova Scotia, the National Commercial Bank, First Global Bank, CIBC FirstCaribbean International Bank and the RBC Royal Bank recorded the highest fees.

It said this was the most noticeable in the area of e-financial services where First Global Bank had nine of the highest fees out of 24 services. It said out of 64 services overall, First Global accounted for 21 of the highest fees, while CIBC FirstCaribbean registered the most incidents of lowest fees, 16 of the 64.

The Commission said an analysis of data it gathered on the rates and fees charged by commercial banks in Jamaica for 2009 to 2013 revealed that since 2009 with respect to savings accounts both the withdrawal and deposit fees at the Bank of Nova Scotia have experienced a 115 per cent increase, moving from $100 to $215. It said for the National Commercial Bank withdrawal fees were also increased by 115 per cent, moving from $100 to $215 as well.

The Commission said withdrawing funds from savings accounts at RBC Royal Bank has increased by 100 per cent, from free in 2009 to $175 in 2013, while withdrawing from savings accounts at CIBC FirstCaribbean Bank increased 129 per cent, from $70 in 2009 to $160 in 2013. In the meantime, it said depositing funds in savings accounts at RBC was free of charge while with respect to First Global Bank, depositing and withdrawing from savings accounts were free of charge.

According to the commission, data from its Complaint Management Database revealed that the main issues consumers had were Automated Teller Machine (ATM) fees, overdraft fees, penalty fees, dormant account fees as well as interest charges on outstanding balances, credit card accounts and settlement of loan accounts. Other complaints surrounded system errors relating to payments posted to incorrect accounts, incorrect amounts posted and ATMs not issuing funds. Consumers were also concerned about stolen debit or credit cards and unauthorised deductions from accounts as well as the actions of banks when recovering outstanding funds.

Government committee member Julian Robinson, who was the first to raise the issue of the level of fees associated with electronic transactions, particularly withdrawals, argued that while banks are urging customers to use automated channels, the costs associated with doing so were a turn off.

"If the desire is really to move persons away from human channels which are clearly more expensive to automated channels and I would say the vast majority of persons who use ATMs do so for withdrawals then you are really not influencing persons to use your machines if that is one of your highest charges," he noted.

Colleague Government Committee Member Sharon Ffolkes Abrahams was also concerned about the less than upfront approach taken and made the point that the Consumer Affairs Commission has asked that banks display electronic charges inside ABMs.

Dr Dwayne Henry, chair of the Public Policy and Legislative Committee of the Jamaica Banker's Association and vice-president of Government Affairs at Scotia Bank contended that with the overall cost of providing banking services increasing, the global trend has been to move away from the banking hall to cheaper channels.

"Gone are the days when we could fully absorb for most institutions the cost of providing these services according to channel. So it is that electronic banking is still cheaper and very much so than in other means in the banking halls," he said.

Responding to queries as to whether there was any provision in law mandating financial institutions under the BOJ's watch to give notice to customers of the fees they are imposing, general counsel for the BOJ Robin Sykes said the issue of notification is one which is going to depend on the contractual terms.

President of the Jamaica Banker's Association Maureen Hayden-Cater, while pointing out that the association was not involved with setting fees for the various organisations, said based on the existing code of conduct, all banks have agreed to make information on fees available on their websites, brochures in the banking halls, and through customer service representatives.

"As it relates to displays in ATMs that is a technology solution that has to be put in place, I know it's not currently in place. If I speak on behalf of First Global, we do not own machines and so we do not have the capacity to put that information there, but other banks are looking at it," she said.

That rationale, however, did not sit well with the Opposition's Daryl Vaz.

"First Global's explanation in relation to not being able to put information on fees up because they don't own ATMs is unacceptable. For me to sit here and listen to that it's difficult. The fact of the matter is that there is a reluctance to do so... The customer deserves to know... there can be no excuse for that," he said.

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