Mr. David Orlikow (Winnipeg North):
Mr. Speaker, 1 find it interesting that the Government thinks this Bill is important, but we know that it is only important to the Government. Given the tremendous antagonism to the kinds of rip-offs the banks have been doing to their customers, the Government had to appear to want to deal with the problem. In fact, this Bill does very little, if anything, to deal with the kinds of problems which thousands of customers of banks had to accept in recent years.
We are opposed to this Bill in principle because it does little to provide consumers and small businesses with any guarantees that they will be protected from unfair charges on the part of the banks.
What does this Bill do, Mr. Speaker? The Bill legislates the banks to publish a list of charges and to inform customers and small businesses of banking fees. I was in the branch of the Royal Bank with which we deal and it had a little pamphlet which said there were 168 different ways of a customer dealing with the bank. I ask Members of Parliament and the Minister of Finance (Mr. Wilson), which ordinary Canadian, which small businessman can possibly think through and come to an informed decision on which of these 150 different ways he or she can deal with the bank.
This Bill is based on the assumption that informed customers are the protected ones, but that is not the case at all. This Bill, if enacted, will do very little to help consumers who live in communities where in fact there is only one bank to help any community; nor will it do anything about charges that are already in place.
This Bill will require the bank to designate an employee to handle complaints about service charges. What bank employee will tell his or her employer, the bank, that it is charging exorbitant rates or that it really has not explained the situation to the customer?
As well, they can go to the Office of the Superintendent of Financial Institutions to make the last appeal for unfair charges. Given the kind of reports we are getting daily about how inadequate our financial regulators were in dealing with the Principal Group of companies, a case in which ordinary Canadians lost hundreds of millions of dollars unnecessarily, we can see how little this means.
This Bill means, in fact, that there is no independent body to handle grievances. The superintendent is charged primarily with ensuring the solvency of the banks, not the protection of their customers.
What are the kinds of complaints ordinary Canadians have made in recent years? I can tell the House of one such complaint from personal experience. My wife saw an ad for an item being sold in the United States which she thought our grandchildren would like to have. She sent a cheque marked in U.S. funds for $6 to pay for the item. Even though the cheque was marked in U.S. funds, the bank charged $8.50, and this is from memory, as a service charge.
A 62-year-old Ottawa widow was seeking change for a $20 bill so she could do her laundry at the laundromat and was charged a $2 service fee by the Bank of Nova Scotia. This happened in June of this year. A pizza vendor in Oshawa went to his bank to get some rolls of change which he needed in order to settle the accounts with his customers and was charged 40 cents for every roll of 50 pennies he got from the bank.
Let me give some details of the kinds of things the banks have been doing and which, as far as we can tell, will not change at all as a result of this legislation. As reported in The
September 30, 1988
Toronto Sun of August of this year, the charge for an overdraft cheque on an account will increase by $1 to $5, a 25 per cent increase. Returning an NSF cheque will cost $15, also up $1 or 7 per cent. The charge for searching for any transaction through a person's account will cost $2, up 33 per cent. If the transaction took place over 60 days previously, the charge will be $25 a hour, up 25 per cent, with the minimum charge being $15, up 50 per cent. The charge for presenting a cheque not computer encoded will rise 8 per cent to $3.50. Those are just a few examples.
Let me deal with the Royal Bank. Among other things, it will increase service charges for people holding gold, silver, term notes, demand notes, and Treasury Bills and for handling escrows. Among the increases for business services are 70 cents from 66 cents per cheque, deposit, debit or credit entry in Canadian funds; 72 cents from 68 cents for the same service in U.S. funds; $1.80 from $1.70 for each $100 of rolled coin deposited; $20 from $15 for an oral or written credit report; $25 from $20 for an oral credit report followed by a written report; and $14 from $12.50 for each NSF cheque returned. That is the charge for ordinary customers.
Let us look at what the banks will be able to do to the small businessman or woman after this Bill is enacted. After all, if one listens to Conservative Members of Parliament, to the Prime Minister (Mr. Mulroney) or to the Minister of Finance, one hears repeatedly that the small business person is the backbone of the Canadian economy, that he or she creates over 80 per cent of the new jobs, and on and on. Look what this Bill will permit the banks to do to small business people.
The illustrations I will put on the record come from the Canadian Federation of Independent Business which analysed this Bill. These small business people are not in any hurry to be critical of the banks, because without the banks they really cannot survive. They are captives to their particular branches, even more so than consumers who, if they get annoyed, can move their accounts from one bank to another. For small business, fear of offending the bank manager, something which might prejudice future business dealings, is a very real risk. Despite that, small business people still have major objections to this Bill.
First, the federation called for the banks to adopt a clear, open service charge policy which is consistently applied. Schedules must include the exact service on which a charge is applied, the exact price, and how long the price will be in effect. Nothing like that is in this Bill. Second, it calls for the elimination of blanket clauses used by the banks to waive the right to notice of service charge changes. In other words, small business people would like to know for some considerable period of time what the actual costs to them of services they get from the bank will be.
Third, the chargeback for NSF cheques from third parties should be eliminated as the banks have voluntarily done now for consumers. If an individual or company sends a cheque to a small business operation for work, service or goods supplied
and the cheque bounces, why should the business person be charged for it?
Fourth, the federation says that bank errors should be paid for by the banks. It is saying that if an employee of the bank makes a mistake, and that mistake is caught at a later time, the cost of correcting the mistake made by the bank is charged to the small business person. How that can be justified by the banks, I cannot understand, and why the Government's legislation would not at least take care of that objection which is so obviously valid, I simply cannot understand either.
Fifth, the federation says that the communication of bank service charge policies and changes to these policies should be dramatically improved. In other words, to give the individual or business customer a booklet with 150 different ways of doing business is simply not good enough.
The CFIB suggests in its conversations with us that what small businesses really need is a yearly contract with their banks regarding services so they can plan their financial requirements. That seems to me to be a very valid, simple and justified request. As the CFIB has pointed out, the banks have traditionally accused small businesses of failing to manage and plan. Yet these unpredictable ever-increasing service charges are part of the problems of small business.
Finally, they point out that the Government's recent pronouncement on monitoring bank service charges and making changes to the Bank Act do nothing for small business. Those charges that the banks have volunteered to roll back or eliminate do not apply to small businesses. Further, they point out that given the track record of banks to date on interest rate charges on credit cards, an issue highlighted only a year ago, regulation and legislation is the way to deal with the banks.
When the Minister announced his Government's response to bank service charges as they affect consumers, he referred to "certain reprehensible and objectionable charges" having been voluntarily withdrawn, among them "recipients of NSF cheques will not be charged for depositing these cheques in their personal accounts".
Yet these same reprehensible and objectionable charges are continuing to be passed on to small business by the banks. We ask where the Government is, where the Minister is, and why the Minister does not live up to the promises he made.
When dealing with banks we are talking of a group of companies which play a tremendously important role in the economic and social life of this country. After all, the banks' decisions on whether to permit a loan, the size of the loan, the terms of the loan, and if and when the bank may call in that loan, give the banks tremendous economic and social clout.
We are not talking about some poor neighbourhood mom and pop store. We are talking about companies which are among the most profitable in this country. Let me put on record precisely what I mean. The latest figures we have are
September 30, 1988
those for 1987. Let us look at bank profits and special writedown provisions, that is, their profits after regular taxes, including deferred taxes which are usually never paid, but before special write-downs they were allowed to make for tax purposes. Let us just look at how the banks did.
The Canadian Imperial Bank of Commerce had profits of $387 million. The Bank of Nova Scotia had profits of $381 million. The Bank of Montreal had profits of $413 million. The Toronto-Dominion Bank had profits of $528 million, and the Royal Bank, the big daddy of all the banks, had profits in 1987 of $541 million. That adds up to a total of $2.25 billion on which, as I have indicated, they paid very little in real tax.
On top of that they were permitted to make special writedowns for the huge loans they made to Third World countries, to companies like Massey-Ferguson which has disappeared, and to some of the oil companies as well. They were permitted to make a special write-down-and I do not have the time to give it bank by bank-of somewhere between $2.5 billion and $3 billion. These companies, which are among the most profitable and most powerful in this country, actually paid very little in real taxes on, as I have indicated, profits of well over $2 billion.
Let us look at the profits which they made from service charges. When you and I, Mr. Speaker, go into the bank and are charged 25 cents or 50 cents for a transaction, it does not seem like a great deal, but when you add these millions of transactions together and see what the banks charge, you get an amazing picture. Here is what banks made on service charges in 1987. The Toronto-Dominion Bank made $138 million.
Topic: GOVERNMENT ORDERS
Subtopic: BANK ACT