Banks must be held accountable

  • Publication: Red Deer Advocate
  • Date: 2007.01.04
  • Section: Comment
  • Page: A4

It's no secret that banks are among the most profitable businesses in the country.

Canada's six biggest banks recorded profits of more than $19 billion collectively last year.

And, unfortunately, they made a lot of that money because for decades federal governments (Liberal and Conservative) have failed to hold the industry accountable.

In short, Ottawa has done a lot to protect the banks from competition and appropriate regulation, but very little to protect consumers from the greed of the banks.

No doubt, some politicians have taken the stance they have because the big banks make substantial financial contributions to all of Canada 's major political parties.

Lest you think such cynicism about the industry is unfounded, it's worth a few moments to visit the website of the Canadian Community Reinvestment Coalition (www.cancrc.org).

The CCRC is a non-profit organization that speaks out on behalf of various anti-poverty, consumer, labour and small business groups.

It is lobbying Ottawa to force the banks to prove their profits are reasonable and that they are treating customers fairly - regardless of how little or how much money customers have.

The Canadian Radio-television and Telecommunications Commission (CRTC) forces broadcasters to serve the public good, in a variety of ways, in exchange for reaping the benefits of operating in an environment of limited competition.

Similarly, companies that sell electricity, natural gas, etc. generally have to prove to such regulators as the Alberta Energy and Utilities Board that their prices are reasonable.

Canadian banks, on the other hand, are relatively free to charge what they want for their services and mostly protected from having to compete with their bigger international counterparts. Yet they are allowed to crank up their earnings by closing branches in low-income neighbourhoods and charging exorbitant service fees and credit card interest.

Duff Conacher, chair of the CCRC, is quite correct in calling on the federal government to declare banking an essential service that must be made available to every Canadian, in every reasonably large community (with banks retaining the right to chalk up reasonable, but not obscene, profits).

Just like companies that sell electricity, natural gas or telephone service, Canadian banks should should be forced to prove they are charging appropriate prices for their services and fairly serving customers across Canada.

Otherwise, we might as well open up Canada 's banking industry to Bank of America and Citibank.

The cheque-cashing and payday-loan industry is growing in Canada , mostly because the banks are doing a poor job of serving lower-income Canadians.

In 2002, Liberal MP John McCallum slammed Canadian banks for charging credit card interest that is "grotesquely high," but his government did nothing to resolve the situation.

Now, with the Conservatives in power, there doesn't appear much hope they will do anything about the problem either.

There's ample evidence to support the view that Canada 's extraordinarily profitable banking industry is out of control.

For instance, amazingly, in an interview televised on CBC, a spokeswoman for the Canadian Bankers Association readily admitted that credit card interest rates are not tied to the prime rate.

In other words, they do not simply reflect what it costs banks to extend credit to consumers. Instead, the rates reflect what the market will bear (what the government will let the banks get away with).

That's not a crime, but it's not exactly fair either.

CBC's Marketplace TV program did a good job of outlining in one of its episodes the various devices banks use to milk their credit card customers (the information is easily accessed on the national broadcaster's website). Visit the site.

Conacher has noted that banks are held to a much higher standard in the United States than they are in Canada.

For instance, in the U.S. they can be forced to take corrective action if they are not meeting customer needs and are even prevented from merging or taking over other financial institutions.

Canadians deserve better banks, but we won't get them until we start complaining to the federal government. Let's start today.