Evidence of meeting #77 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.
Senior Vice-President, Personal Banking and Wealth Management, National Bank of Canada
I don't think that would be acceptable to our shareholders. Let me remind you that our clients would also tend to become Desjardins clients or use its services because they could then use our system for free. That would really put us in a very unfavourable competitive position.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
All right.
I have another question.
I understand that in rural areas there are problems with access, but in a riding like mine, in the east end of Montreal, there are tonnes of banks; we have plenty of banks. Even if I have to go to another bank to take out money, it's only going to cost me $1 or $2. But why are these white labels getting away with $5 and $6 charges? That's the problem. That's what I don't understand. Could somebody explain that?
Mr. Hockey, go ahead.
Co-Chair, TD Canada Trust, Toronto Dominion Bank
I think it's a function that we sometimes forget about. We've heard from some members that customers and Canadians are up in arms about the fees. Again, when the choices that customers make are on white labels, paying sometimes $5 or $6, that is a choice that is very transparent to them. The fee is there, right on the screen. What we find in our research--and we talk to very many of our customers, as I've said--is that they actually make the discrete choice that says you know what, I'm going to say it's okay to pay $2, $3, or $4, because it's worth it to me not to have to walk across the street.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Do you have any idea who is paying the $5 or $6? Because I know I don't. I go out of my way to make sure I don't pay fees.
Co-Chair, TD Canada Trust, Toronto Dominion Bank
As we all said, it's quite a small percentage of our customer base. But they are customers who clearly are not very—
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
I find I used to do it more when I was younger, because I was probably lazier. But now I guess I work harder for my money than when I was younger--I'm not sure.
Conservative
Conservative
Conservative
Rick Dykstra Conservative St. Catharines, ON
Thank you, Mr. Chair.
One area that's a bit of a take-up is this. I certainly don't want to speak for Ms. Wasylycia-Leis, but I'd like to think one of her concerns has been those who use the ATMs and pay the additional fee. Depending on which bank you're with, anywhere from 15% to 30% of clients of the banks use ATMs that are not their bank, so to speak. Have you ever done an analysis, a study, to determine who those folks are? Are they folks who are using them because they have the means? Are they those who probably shouldn't be using them, based on their incomes?
I'd open up the floor to anyone who would like to respond on whether you've actually done some of those studies.
Co-Chair, TD Canada Trust, Toronto Dominion Bank
I would say the one demographic trend that we do see is that generally seniors avoid those types of machines and they're much more prudent with their money. As your customer base gets younger, students are much more willing to pay for convenience. I would say that is a general trend we would see--by age. It's one slice.
Conservative
Rick Dykstra Conservative St. Catharines, ON
So it's not specific to a particular household income or personal income, the determination of who uses or who doesn't use the ATMs that are not of the same bank.
One of the other points is this whole aspect around the lack of ability in some areas of our country to be able to use a machine, and therefore it is a white label. Could you explain to me why, in particular circumstances, there are only white label machines and there aren't other bank machines, those of the top five or six banks?
Senior Executive Vice-President, Retail Markets, Canadian Imperial Bank of Commerce
That's generally driven, or almost always driven, by the institution, by that location. RFPs go out, banks will generally bid on those locations, and very often the institution itself selects a white label as a result of the fees they pay them to be in that location. We've talked about universities, we've talked about hospitals, we've talked about many of these locations, and it is the choice of those institutions to have a white label machine.
Conservative
Rick Dykstra Conservative St. Catharines, ON
One of the things you have begun to roll out from a banking perspective and from a business investment perspective is your willingness to get into those types of communities. Are you doing that based on the fact that you think there's profitability there, or are you doing it because you realize a service needs to be delivered and you have a responsibility, as a financial institution in this country, to try to deliver that service?
Senior Executive Vice-President, Retail Markets, Canadian Imperial Bank of Commerce
In our case, we're doing it because our customers are there and we want to be able to offer them that access, convenience, and service. The universities are a perfect example. We have customers there that we want to serve. We are not on location in some of those cases; we're within walking distance so we can meet that need.
Co-Chair, TD Canada Trust, Toronto Dominion Bank
Exactly the same story that was announced earlier. We did an analysis of all the colleges and universities where we didn't have a presence ,and we wrote to each university president saying we'd like to have access to be able to serve our customers. We realize this decision is made by each of those universities and colleges, and they very much have a revenue stream being provided to them currently, usually from a white label, that we may not be able to break.
Conservative
Rick Dykstra Conservative St. Catharines, ON
One of the final questions I have is to Mr. Taylor. You mentioned a number of complaints you've received, issues you've dealt with, but what I didn't hear was a response to any of those. Are the banks treating customers fairly? In your estimation, on the results of the investigations you've done, are banks doing what they are hoping to do, serving their clients, or are there unfair advantages in the marketplace, based on your analysis?
Deputy Commissioner, Civil Matters Branch, Competition Bureau
We don't look at those kinds of issues; we look at anti-competitive conduct, such as price-fixing, when competitors get together and agree—
Conservative
Rick Dykstra Conservative St. Catharines, ON
Have you found any results that would point out collusion or price-fixing?
Deputy Commissioner, Civil Matters Branch, Competition Bureau
No, we have seen no evidence of that.
Conservative
Rick Dykstra Conservative St. Catharines, ON
You would argue they are presenting in a fair, from your perspective.... I understand you have to be careful how you answer the question, but the banks are trying to provide a competitive service so people can, when they so choose, find an institution to deal with?
Deputy Commissioner, Civil Matters Branch, Competition Bureau
I can't really answer your broad question. All I can say is that under the Competition Act, we have no reasonable grounds to believe they're violating provisions in the act that would suggest they're artificially lessening competition through agreements or other things that we would find hurt competition.
Conservative
The Chair Conservative Brian Pallister
Thank you, Mr. Dykstra.
We'll move to some quicker rounds. We have a few members who would like to have another turn to question.
Mr. McKay, we'll start with you.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
I'll direct it to Mr. Taylor.
Mr. Taylor, in the material you gave the committee, you said when the bureau investigated Interac—this is prior to the 1996 order—it was upset with a number of practices. The practices included “prohibiting charges for ABM use which discouraged the placement of ABMs and deprived consumers of the benefits of ABM deployment determined by market forces”.
Then your order comes on. Included in the order is “remove the prohibition on surcharges, which are now known as convenience fees”.
Then you go on in the body of your presentation and say, “...the Order did not in any way mandate or regulate the imposition of surcharges. However, allowing surcharges permitted operators of ABMs to determine and charge a competitive price for ABM services based on their cost, consumer demand”. The consequence is that in 1995 there were 12,808 ABMs, and in 2006 there are just 54,000-plus.
Then you finish by saying that “Canada has the most ABMs per capita and we are among the heaviest users of ABMs”.
That seems to be a clear, evidential-based analysis of what the removal of the fees issue is on the accessibility for Canadians to banking services.
Would you agree with that?
Deputy Commissioner, Civil Matters Branch, Competition Bureau
That was our intention in dealing with that aspect of the original Interac rules that precluded surcharging. We felt that competition takes place, and this was an important consideration on not only price but innovation and service. Any three of those elements could be harmed, so we felt that those prohibitions on surcharging were certainly hurting innovation, the spread of ABMs, and the offering of convenience to consumers.
