Finance Committee on March 22nd, 2007

[The Chair, Conservative, Brian Pallister]

Yes, sir.

[Raymond Protti]

I'll have my colleague, Ms. Michell, explain our estimate. There is an estimate out there, which was put out a couple of months ago, that suggested that the amount we made from convenience fees, the $1.50 charge, was something in excess of $400 million. That number was derived by taking a U.S. study and taking 10%, but our--

[The Chair, Conservative, Brian Pallister]

Raymond, I'm going to constrain myself and my time, as I do for my colleagues. I just want to know the percentage that's derived.

[Raymond Protti]

We think the number is $153 million.

Do you want to...?

[Karen Michell]

That's basically just the Interac total.

[The Chair, Conservative, Brian Pallister]

The percentage of bank revenues that's derived from ATM fees is what I want an answer to.

[Karen Michell]

About $153 million, as a percentage of bank revenues, would be some very small fraction of 1%.

[The Chair, Conservative, Brian Pallister]

Thank you.

There's always a concern, when we are dealing with issues of any kind here, about the law of unintended consequences. Now, you've said repeatedly that we have the greatest access to ATM services in Canada of any country, and I think that's great. I represent a rural area, in which, as Mr. Thibault alluded earlier, it would be most inconvenient and costly for a lot of my constituents if they couldn't access the services of these machines. Some of them can't now, in fact, without driving considerable distances, access these machines. I'm concerned about the unintended consequences of making it less attractive to banks to invest in the further expansion of the installation of these types of machines.

I fail to understand how reducing the profit that could potentially be derived from the installation of such machines would result in further services being available to Canadians who can't access banking services. I fail to understand the relationship between those two. So I guess I'm asking here, to what degree do you think a reduced profit might result in a reduction of the availability of machines, which would subsequently be replaced by the white label machines, which cost a heck of a lot more?

[Raymond Protti]

Mr. Chairman, I think you've struck what is a critical point for deliberation by this committee, because there is, indeed, the possibility of exactly those unintended consequences.

We don't have to look further than the U.K., and what happened there, when it was agreed that the banking institutions would drop the convenience fees they offered. What we've seen is a precipitous drop in U.K. access to ABM machines as a consequence. We've also seen that it's put a real damper on the development of their shared-cost dispensing and point-of-sale terminals. So I think you've put your finger on a really critical issue here.

I have a lengthier explanation on precisely that point, which I'm going to provide to you in writing.

[The Chair, Conservative, Brian Pallister]

Thank you, sir. We all look forward to that.

Mr. Del Mastro.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you, Mr. Chair.

Probably the best sound bite of the morning, I would suggest, is Mr. Johnson's indicating that “regulation is required when forces of competition fail”.

Mr. Protti, you indicated that there is competition. At least certainly you feel that way. There are hundreds of different bank packages available that consumers can look at, that they can choose from, that have many cost-saving measures in them. Why aren't the banks doing more to talk to people about these options? Why aren't they doing more to educate people?

I think people understand that there are fees for convenience. We understand that if we go to a convenience store, we'll pay more for our groceries than if we go to a grocery store. We understand that there is a fee for convenience. But why aren't the banks doing more to educate people about how to avoid paying fees and how to save their money?

I know it's certainly very attractive in the media to talk about how we want to help people save money. Isn't this a great area where the banks could be talking to people?

[Raymond Protti]

Well, I think you have an excellent point, sir, with that comment.

Each of the banks has a strategy for educating their client bases. It can be face to face, through brochures, through their websites. Each of the banks has its own program, and I'm going to provide you with some information on each one of those.

In addition to that, at the industry level, I am particularly proud of one thing in the last 11 years, and that's a massive education campaign that we have undertaken on a variety of issues, including, in particular, the one you have just talked about. We have distributed over five million free booklets to Canadians on a variety of issues. The most important one is how to get value for your fees. There's a very simple calculator in there. You look at your customer profile and decide how you use the banking system, and it points you in the direction of the sort of package you should have.

In addition, perhaps the very best thing that's happened in the 11 years I've been there is a high school education seminar that we provide on personal financial management. How you can manage your money in the most efficient way is at the heart of that particular program.

[Dean Del Mastro, Conservative, Peterborough, ON]

Okay, and I appreciate that.

I think an opportunity exists for your membership--the banks--that want to come out and say, “Let's compete on providing value for service for our customers. Here it is. Here's how we want to do it. Here's how we want to educate you as to how to save on paying bank fees.” I think that's a great opportunity for one member or a group of your members to go out and achieve a higher level of customer penetration in the Canadian market by telling people, “We actually want to work with you to help you avoid paying fees.” I think that's an opportunity, and it's something you should look at.

[Raymond Protti]

I agree with you.

[Dean Del Mastro, Conservative, Peterborough, ON]

The other point Mr. Johnson made, which I thought was significant, was that restricted choices for seniors, students, and rural Canadians is resulting in them paying, perhaps, a disproportionate amount of these fees, more than, say, someone like me who has the ability to access my own bank's ABMs, or who perhaps has a bank package that means I don't have to pay these fees.

How can we help out these groups, especially people who may be handicapped or disadvantaged, perhaps even disadvantaged by their geographical location within Canada? How can we help these people? What can the banks do?

[Raymond Protti]

I take your message to heart, and I'll be taking your message back to each of the institutions very clearly.

I'm a senior now, and I qualify for a free fee package from my particular bank, and I think most of the banks--

[Dean Del Mastro, Conservative, Peterborough, ON]

Do you get a senior's haircut, too?

[Raymond Protti]

Don't get me into that.

Just very quickly, three weeks ago, I went in to get a trim. The guy ahead of me was there for 15 minutes in the chair at my barbershop. He had a magnificent head of hair. He got charged $27. I was in there for eight minutes. I got charged $27. So please don't mention hair to me. It's a sore point.

So for seniors, there are clear packages available. For students, it's the same way.

Can we do a better job in kind of informing and messaging on this? Your point is very well taken. I'm going to take it back to each of the institutions.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. Del Mastro.

We'll conclude now with Monsieur Pacetti.

Monsieur, quatre minutes.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chairman.

Because time is limited, I have just a couple of questions.

I'm just having a bit of trouble here, because we're here to look at ABM fees and I'm not sure.... Mr. Johnson, I have a quick question. What do you need to go to a bank for? From what I understand, do we need access to a bank, really, to take out money?

[Dr. Lew Johnson]

No.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

It sounded like you wanted to go back in time and not have all these services available.

I can't remember the last time I was in a bank. The only time I go to the bank is when I'm withdrawing money. I make my deposits. There are direct transfers available on the Internet or with an ABM.

We're here for ABM fees, so if we can stick to that, I think that's the idea. What you were saying is that we shouldn't regulate, yet the competition is not there, if we just focus on the ABM machines. What are we saying? Do we need banks? What kind of competition do we need? Do we need more banks?

[Dr. Lew Johnson]

My basic statement, sir, is based on the premise that access to financial services is a need and a right for Canadians. The banks have reorganized the system to their benefit, which has made access for many consumers less convenient. And I call that commodification, just turning all these bank services into machines.

To the extent that the commodification was self-serving at the expense of many Canadians, then Canadians should be able to access the banking system through a commodified machine, but at the same price, no matter what the purveyor is among the banks.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Okay.

I'm limited in time, but I would have liked to continue.

I'm a member of Parliament from east-end Montreal. If we talked only about branches that closed 10 years ago, I would say you are more or less right. However, in my riding, in the district of Saint-Léonard, there are four branches of the TD Bank that have opened and they are now 12 to 15 caisses populaires, I believe. Therefore there is competition, but as Mr. St-Cyr pointed out, we have a problem when we go into a business and are forced to use a no-name ATM.

I think that you are a protector of consumers. How we could avoid this? That's the problem. The problem is these no-name or white label ATMs. When I don't know any other place, I will be forced to use that kind of ATM the first time, but there won't be a second time. If there are no profits to be made with this, the others will not offer more options, but there is a way to strike a balance between these two aspects. We're looking for a solution and I don't think that you've proposed one here today.