Evidence of meeting #76 for Finance in the 39th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was banks.
A recording is available from Parliament.
Conservative
Mike Wallace Conservative Burlington, ON
And has that been around for a while, or is that something new?
President, The Exchange Network (FICANEX)
The Exchange actually pre-exists Acculink by three years, so it's been around since 1983, and Acculink, to my recollection, has been around since 1996. So it's been in place for quite a long time, yes.
Conservative
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
Thank you, Mr. Chairperson.
First of all, I think the point that Duff and others have made about the difficulty for us to proceed in a serious way without accurate information is a good one, and we need to find a way to get that audit done.
I should point out that after we lost the efforts to reduce and eliminate ATM fees, a motion was presented to this committee during consideration of Bill C-37 to at least get disclosure, full disclosure, of costs and fees. That was defeated. That was defeated at this committee, thanks to the Liberals' supporting the Conservatives, so we're at a real impasse here in terms of basic democracy and basic information. I don't know why there is this need to cover up. I don't know what we'll hear from the banks on Thursday, but this is where we're at.
In terms of the costs and the whole question of what's justified, I think the economists here--and Mr. O'Connell, and even Mr. Trigg and the Consumers' Association of Canada--should answer the fact that the costs have been identified. Perhaps they were not identified by the banks, but we had witnesses at this committee; I'll just put on record Dr. Lew Johnson's figures of, at maximum, a 60¢-per-transaction cost to the financial institution. He rolls in about a 30¢ fee, at the most, in terms of a transaction for the bank involved. He says the Interac fee or the switchback fee is 2¢ to 15¢ per transaction. You can add something for technology, add something for something else, and at most you are talking about a 60¢ cost per transaction.
Do you know what that means, Consumers' Association? It is over a 500% or 600% markup to consumers. Is that acceptable to you? You say it's the way it is and you're just going to accept it. I can tell you, you may hear from a certain number of constituents and people out there, but the vast number of Canadians are concerned that they're having to pay that kind of markup and pay that kind of cost when the banks are making the profits they are and exceeding their costs by 500% or 600%.
How do you justify that? How do you justify that? How, Mr. O'Connell, do you not say anything in the face of that kind of situation? How is it that it's not reasonable at this committee to talk about a more reasonable fee structure? What is the problem here? Whose interests are you trying to protect? Are the banks' interests that important--
Conservative
Conservative
The Chair Conservative Brian Pallister
That's the seventeenth question you've asked, and not with any time allowed for any answers, so I would suggest that the few minutes you have remaining, it would be good to hear from some expert witnesses on the issue. Perhaps a question to them would be useful.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
Yes. I'd like to know from the Consumers' Association of Canada how a 600% markup is allowed, and I'd like to know from Nadia Massoud if, in all her machinations or numbers, she included the savings to all the banks from closing so many branches, eliminating physical infrastructure, and laying off personnel as part of the savings that they are generating as a result of going to ATMs.
Vice-President, Consumers Association of Canada
Madam, I think you are going well beyond the purview of what we are here to discuss.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
Excuse me.
On a point of order, Mr. Chairperson, we have a motion before this committee to study the broad issues of bank fees, ATM fees, Interac and electronic banking. In fact, I'll point out to you, Mr. Fruitman, that the motion before the committee is the result of my work, and it was there to deal with a very important consumer issue. So if you'd like to answer the question, a very specific one--
Vice-President, Consumers Association of Canada
Thank you.
First of all, I do not know whether the information you have presented is accurate. We would not disagree with a limited look at the financial institutions along the lines that Mr. Conacher has suggested. If indeed there is collusion or if indeed there are markets in which there is no true competition, then those could be looked at.
In terms of the actual profits of the financial institutions, in the absence of proof of those two problems, we're not asking to have regulated fees for an industry in a competitive and open marketplace in this country.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
That was sworn testimony--a 60¢-per-transaction cost. That's what I'm asking about. Are you saying you can justify a charge of up to $4.55?
Vice-President, Consumers Association of Canada
We could justify it no more than we can justify what Wal-Mart charges for any of the items in its store.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
You lump the banks in with Wal-Mart? We shouldn't have a Bank Act, and we shouldn't have any regulations, and people shouldn't trust their governments to set a proper regulatory frameworks?
Conservative
Conservative
Dean Del Mastro Conservative Peterborough, ON
Thank you, Mr. Chair.
I don't know where to begin. I'm afraid the temperature in the room is going to come down a touch with the next line of questioning.
Mr. Fruitman, it would seem to me that what we have before us is a tremendous opportunity for the banks to respond in a fashion by which they might gain an advantage over some of their competition. The banks compete for clients, and there's no question they compete for clients. I sat here for about 30 seconds and came up with a couple of buzz terms. I'm sure everybody's heard them: “banking can be this comfortable”; “you're richer than you think”; “putting you first”; and “save your money”. These guys spend a fortune trying to attract clients.
If I were the representative of a credit union, I'd love some of the promotion that we'd get out of this. Everybody's learning that the way to compete with the chartered banks is to run with lower fees and to be more welcoming as far as using other competitors' machines.
Isn't this an opportunity? Wouldn't the consumers association see this as an opportunity for the banks to perhaps compete on a different level?
Vice-President, Consumers Association of Canada
If the financial institutions or the banks indeed felt they could attract more customers to them rather than to their competition, yes, it's what competition is all about. We see there is quite a great deal of competition in the marketplace.
All of us would like to pay less than we are paying for just about anything we do or buy, and that is the case here. If somebody wants to indeed lower the charges, then it may attract more customers. They are free to do so. We would indeed encourage them and would like to see them do so. We are not saying they should be forced to do so.
Conservative
Dean Del Mastro Conservative Peterborough, ON
Thank you.
As a former retailer, I can tell you that it's very simple to say here's the cost and here's what you're charging on a direct service you may be providing or on a good you may be selling. Those aren't really the costs that go into providing the good or service, because you have a lot of fixed charges, fixed assets, and expenditures that you have to make. If you were to only look at the profit margin on any specific good, it might seem excessive, when in reality you have other base costs that you have to cover as well.
Do you think it's reasonable to look at the cost of a very specific service, analyze it in correlation to the direct cost without looking at the overhead cost of that service, and determine that it may be exorbitant? Do you think it's reasonable?
Vice-President, Consumers Association of Canada
You're quite right. In other organizations, one would never take a look at the cost of only one specific service. You have to look at the overall cost of the operation and determine what is profitable.
Talking about retail, we know that sometimes they're sold at less than cost for marketing purposes and at other times they are sold for ridiculously high markups in the hope that it all averages out.
Conservative
Dean Del Mastro Conservative Peterborough, ON
I'd like to put the same question to Nadia. Perhaps you might have an opinion on that.
Assistant Professor, Finance and Economics, University of Alberta, As an Individual
Thank you very much.
Basically, my study showed that you put the ATM surcharge significantly above the marginal cost. I'm not looking at the level of the marginal cost. I'm saying you could use this fee as a marketing tool.
If you look at banks, they spend lots of dollars on advertising. Instead of spending it on advertisements, they could spend it on ATM machines. This is a marketing tool for the banks. They can say they have a large network, they provide convenience, so switch and be their member. We're not looking only at the marginal cost; there are many other factors that we're ignoring.
I have a really neutral position. I'm a consumer. I would like not to pay anything, but I'm trying to be fair here.
Conservative
Dean Del Mastro Conservative Peterborough, ON
Thank you.
I have one more question.
I think the biggest thing we need to protect people against is the potential for gouging. Mr. Fruitman, would you have a position on what might be considered gouging in this industry? What would be a fair charge and what would be gouging?
Vice-President, Consumers Association of Canada
Again, it's very difficult to assess, because you'd be taking one product or service out of context and separating it from the others. It may be there are certain circumstances that require a different look, such as those where a market is not served at all or is indeed underserved.
In terms of gouging, it would be anybody's guess as to what that would be.