Jack Layton the leader of the NDP issued a statement that his political party wants to change the Bank Act "to prevent banks from charging fees to customers who withdraw, deposit or transfer their own money through bank machines." This is a wonderful sounding statement that is in reality both meaningless and in the words of Canada's banks "ignorant rhetoric." There seem to be two things that seem to drive this statement. One is that financial institutions made $ 19,000,000,000 (billion) in profits and this should be enough to waive the fees charged to consumers. The other reason suggested is that the NDP is losing support to other political parties and was attempting to "reconnect" with its core supporters.
The reality is that all Canadian banks earned $ 420,000,000 a year from ATM charges. While this number may seem large it only represents 2.6% of the profit generated by the bank. Mr. Layton really seems to be upset less at the fees than by the large profits earned. His belief is that one part of the business should be subsidizing another part of the business. The reality is that the largest component of bank profits come from "interest income" and other income comes from such things as "mutual fund and wealth management, securities underwriting, derivatives trading, asset securization, brokerage transactions, cheque processing, ABM transactions, credit card transactions, and payment and deposit services." It seems that ATM fees are easy to fight against since they are the easiest for consumers to understand and are the most visible part of how banks earn their income.
We as consumers are smart enough to understand that ATM fees are easy to avoid and are really convenience fees. All the major banks open early in the morning, late in the evening, and many branches are open on Saturdays as well. By banking in person or on the telephone ATM can be avoided, and in return your fees would disappear as well.
Users of these fees understand that nothing in life is free and certainly not something that brings this level of convenience to such a wide range of people. The banks are responsible for paying rent where the ATM's are housed, the electricity bills, supplies such as deposit envelopes and receipts, armoured cars to refill cash, and the computer networks for all of this to work. We as consumers expect machines to be available 24 hours a days stocked with the cash we need are realize that someone has to pay for this. There is also the realization that if no fees were associated with ATM use then we cannot expect the same level of service and availability as before.
Many gas stations offer free air for those who drive up but sometimes the air pump does not work. Since the service is free we don’t complain and our expectations are not that high. Some gas stations now charge a fee for air and find it in their interest to make sure the pump is always working since revenue is now being generated. Customers can simply avoid this fee by driving to a station that offers free air but with the understanding that the service may not always be available. This is no different that the fees associated with ATM usage. If consumers are really unhappy with what they are being charged then they will simply take their business somewhere else. Today companies such as Canadian Tire and Presidents' Choice offer banking, credit cards, and mortgages. A wide variety of options are available to the consumer.
Mr. Layton complains that "to take a few dollars out to go to the grocery store, the banks shouldn't be keeping $1.50 or $2 or any of that money." This does not reflect the reality that we are able to pay for groceries with an ATM card and do not need to withdraw cash and then use that for payment. Many grocery stores also allow ATM card users to get cash back from their account when making a purchase and there is no fee for this. It does seem that the banks are right in their statement when they say the NDP is ignorant about the subject that they are discussing. The statements issued by the party and it's leader are geared more towards an emotional response and will be easily avoided by those understand the facts.
There is a greater danger that the articles do not discuss which is that a federal act will not be used to limit how much and what type of charges a private company can levy. No other private institution is controlled like Canadian banks are. The Bank Act controls what services they can offer and with which restrictions. Foreign banks, other private companies, and credit unions are not managed by the Bank Act and are free to set their own charges and fees.
The NDP party statement says that they would regulate bank fees but Mr. Layton said in a news conference that he would like these fees to be eliminated. No consideration is given to the consequences of such an action. What would happen if the banks decided to cut back on the number of ATM machines available or impose restrictions that the machines would be available for only a portion of the time. No one would be happy with such a solution since the banks lose a part of their revenue and users are inconvenienced.
It seems that a solution is being created for a problem that really does not exist. People are willing to pay for convenience with the knowledge that they have the ability to avoid these charges. The policy statement on the NDP web site is vague and talks about regulating bank fees and charges but makes no specific promises or solutions. We have the danger that the solution could be worse than the non-existent problem that is being supposedly fixed. The banks built a nation wide network for the convenience of their customers with the expectation that usage fees would pay for the maintenance and construction. Corporations today easily cut back on services are not revenue generators or have to be subsidized the question remains would a bank offer a service that they could not charge for? It would be simple for banks to remove the ATM fees and then increase or add fees for other areas. As a consumer my preference is be aware of fees that are being charged so that I am both aware of them and can educate myself of how to avoid them. By trying to force banks to remove the fees we will simply lose sight of them and instead they will be hidden in some other area. The NDP and Mr. Layton should instead make all hidden fees visible so that consumers can be aware of where their money is going.