NDP MP writes law to ban ATM fees

[SVMc]

Overall I'm still not convinced that the reaction to this bill is not largely due to the fact that it was proposed by the NDP. I should start off again by saying that I don't think the bill itself will do the right thing, that going after service fees is the wrong direction to go when the concern is ATM fees, but I do think that increasing ATM fees are a legitimate concern for Canadian. I just spent the last two hours being grilled by the competition bureau on an entirely different subject, but I do think that the primary argument for forced reduction of ATM fees lies in competition or the lack there of.

Banking used to be done entirely over the counter, every bill payment, deposit and withdrawal needed two people, signature, forms etc... And then came the ATM, the benefits to the bank of the ATM is that they could reduce their human resource costs, and reduce the time they needed to be open to the public. Of course there are capital costs associated with the ATM.

The consumer is benefits because we are able to access our money and information at any time, and are not reliant on bank hours, the trade off is not having a live person to deal with or, having more barriers to getting to that live person when needed.

Now, I don't think anyone is advocating that the bank consumer should not pay for these services. The options are there, for most people when you select your banking package you can either select a flat fee package (which gives you unlimited ATM use) or a service fee package which may be something along the lines of $9.00/month gives you 25 ATM transaction, 100 debit transactions and 20 chequing transactions, no cost for deposits. This is the part of banking that should be free market. If the banks are not able to cover the cost of operating individual chequing accounts with their service fees (which I find highly questionable) then they should raise the service fees to make that happen.

The issue comes into play when there is not enough competition. Here in TO I think it's safe to say we're down to 5 major banks and 1 publically accessible credit union. When competition becomes this slim then banks can act in tandem to withdraw service (less people teller hours) and then levy additional fees and the consumer has no choice but to comply.

Now someone mentioned seeing PC banking machines, maybe I don't live close enough to any supercenters, (is supercenter a brand name?) but I've never seen one, and the people I know who originally signed on with PC banking because of the no fees options have since withdrawn because they are always charged for withdrawing money from the ATM's.

While retail does do cash back this is at the discression of the retailors, and not the banks, why should consumers be dependant on a third party or having to make a purchase through a third party as the only accessible means to access money?

If the banks have the liberty to take the money under a service agreement, and then have the ability to change the terms of the service agreement to add incremental fees that are based on no additional services (i.e. I did not suddenly get more or better service by having to pay $3.00 at a white label machine for my own money) and there is not enough market competition to allow for alternatives to be generated, and the reason there are not alternatives being widely generated for this clear consumer demand is that the government heavily regulates the banking industry, then we need to stop pretending that the banking industry is not deeply in bed with the government already and let the government do some work for the citizens.

 

[gc]

They don't operate a network except basically a website. How would either of these instutions feel about building a large network of ATM's and allowing everyone to use them for free? Why haven't they already and charged people for them?

I can't speak for ING (or other banks), but PC offers free transactions at any CIBC bank machine. There are enough CIBC bank machines in Canada that no one should really have to worry about having access to their money (unless of course they want the added convenience of extra bank machines). If people are really opposed to bank fees, they should really look into PC, ING (can't speak from experience) or some other bank that offers no fees. If enough people start switching their banks, the banks will have to clue in or else lose business.

 

[s243a]

I can't speak for ING (or other banks), but PC offers free transactions at any CIBC bank machine. There are enough CIBC bank machines in Canada that no one should really have to worry about having access to their money (unless of course they want the added convenience of extra bank machines). If people are really opposed to bank fees, they should really look into PC, ING (can't speak from experience) or some other bank that offers no fees. If enough people start switching their banks, the banks will have to clue in or else lose business.

Real choice would be walking into a convience store and having a choice of banking machine. It is pretty clear why this wouldn't work.

 

[Kreskin]

I can't speak for ING (or other banks), but PC offers free transactions at any CIBC bank machine. There are enough CIBC bank machines in Canada that no one should really have to worry about having access to their money (unless of course they want the added convenience of extra bank machines). If people are really opposed to bank fees, they should really look into PC, ING (can't speak from experience) or some other bank that offers no fees. If enough people start switching their banks, the banks will have to clue in or else lose business.

CIBC owns PC. They have a vested interested in clients using their virtual bank. PC allows them to divest themselves of branch staff and bricks and mortar. Plus allowing PC clients to use their machines is much cheaper than PC installing their own machines.

 

[gc]

CIBC owns PC. They have a vested interested in clients using their virtual bank. PC allows them to divest themselves of branch staff and bricks and mortar. Plus allowing PC clients to use their machines is much cheaper than PC installing their own machines.

Either way, I don't pay any fees. If people are concerned about ATM fees, they should do the same.

 

[Niflmir]

It is important to keep in mind that banking is not a free market, and normal "capitalist" market principles (you can shop around for a better deal) don't apply. It is not the case that all banks exist in every area of Canada, and subsequently you can easily be geographically forced into using a bank that charges ATM fees. To say that banks aren't an essential service is equivelent to saying we can live without electricity, meat, home heating, and many other modern inventions: true, but regressive and unacceptable.

However, banks already have an incredible power given to them by government: the ability to create artificial money. The Canadian government is the only real authority on the Canadian dollar and creates money through fiat. Yet, by letting banks carry zero reserve of the loans they give, allows them to create money on a whim. Bank money (loans, debit cards, cheques) are different from the true fiat money (bills and coins). When you give money to the bank, they can now make actual investments in markets, meanwhile they push you to use bank money so that they can keep the real money which they need for investments. That goes a long way to show that when you use bank money instead of bills, you are already giving money to the bank without fees.

We need banks because we cannot safely hold onto large amounts of money without risking robbery. However, if I paid for a storage facility and stored my Ferrari there while I am in Germany, I would be outrage to find out that the manager took my car out and drove it while I was away. Possibly, we could make a deal where I get free service and the manager can use the car, so long as they take liability for damages. Snap back to banks, I want them to safely store my money, I could pay for that, yet they take it out and use it thus enjoying my money. Its irrelevent that I get my money back, they had the enjoyment of my possession, and I am supposed to pay them for that priviliege?

Which brings us full circle to ATM machines. Shorter hours means that I have to use the ATM or skip off work. Higher teller fees than ATM fees insures that I prefer the ATM and subsequently the bank can fire tellers and shorten business hours further. This minimizes their cost since machines are cheaper than people and maximizes their profit since they can charge for the use of the ATM. Meanwhile, you are forced are using bank money and businesses are simply having balances added to their accounts so the real money never leaves the vaults, subsequently they are free to enjoy your money even more without giving you a fair share of the earnings on your money. Its like I stored my Ferrari and got a bus pass. Well, maybe not a Ferrari, maybe just a geo.

 

[BitWhys]

It might be worth pointing out we're talking about the Canadian banking system, which means we're talking chartered banks, which means we're talking oligarchy by design, which means price is the last place you'll find competition. Other than that I still think the bill is off the mark because it does nothing to get the ATMs placed where they're needed.

 

[unspoken]

Although I do agree with a slight reduction in fees, they should not be eliminated all together. Why? Because it costs money to put the machines in, to run them, and to have them serviced. No rational business plan would operate like this, although the communists in the NDP would love it if they could just force businesses to give everything away for free.

It is a dumb idea to eliminate them completely. If this does go through, anyone who thinks the banks are just going to take it is crazy. You can expect fewer machines, fewer tellers available, higher base costs for accounts, higher interest rates on loans, lower returns on savings, and many of the other means they have at their disposal to keep their profit margins right where they are now.

 

[Niflmir]

It might be worth pointing out we're talking about the Canadian banking system, which means we're talking chartered banks, which means we're talking oligarchy by design, which means price is the last place you'll find competition. Other than that I still think the bill is off the mark because it does nothing to get the ATMs placed where they're needed.

Actually, that is very important to point out.

One final note, because it doesn't seem many people support the idea. Bank fees are predominantly a Canadian idea. $420 million in bank fees last year, $19 billion in profit, so bank fees represent about 2% of the profit margins. Clearly providing service to customers isn't the what banks primarily do, using our money to make an enormous amount of profit is. Finally, TD USA doesn't charge bank fees, and when I take money out of a German, French or British ATM to get money from my Canadian account, those ATM's don't charge me anything, but my bank does, on top of the money changing fee, that is.

 

[SVMc]

Actually, that is very important to point out.

One final note, because it doesn't seem many people support the idea. Bank fees are predominantly a Canadian idea. $420 million in bank fees last year, $19 billion in profit, so bank fees represent about 2% of the profit margins. Clearly providing service to customers isn't the what banks primarily do, using our money to make an enormous amount of profit is. Finally, TD USA doesn't charge bank fees, and when I take money out of a German, French or British ATM to get money from my Canadian account, those ATM's don't charge me anything, but my bank does, on top of the money changing fee, that is.

In addition to pointing out that banks are chartered here in Canada (i.e. not free market, government sanctioned, large government influence already) and to pointing out that bank fees are reasonably unique to Canada, it should be pointed out that few people are advocating the wholesale removal of bank fees. It seems that some people on this thread think that those of us who are supporting ATM fee bans, think that the support is largely for the wholesale removal of all bank fees such that a user would not be paying the bank for any of the services. This is not what is being argued. The issue is that if you are with a bank who charges service fees (PC, ING aside) you do pay a service package, you are already in your service package paying the bank for the security, the access to the ATM, phone, internet banking etc.. etc... The large complaint is that on top of paying this service fee package banks are increasingly moving to features where the consumer is driven ATM's where additional payment is the only option. No, we are not fully there yet, I can walk / drive / bus the 18 extra blocks to get to the new Royal Bank Branch since my branch closed and bank there without paying an additional ATM fee, or I can move my account to a bank that is closer, but if the trend continues then it will become increasingly harder for any of us to access bank ATM's that we are already paying for with our service fees. This is the underlying issue. No one's saying don't pay, just don't make me pay for the same thing twice.

 

[TenPenny]

What is being proposed is that the government somehow needs to tell everyone how to run the ATM business.

And since the government is so good at efficiently running things, I can see why.

Sorry, I'm happy to let my bank set its fees and if I don't like them, I can choose to do business elsewhere.

 

[Pangloss]

What is being proposed is that the government somehow needs to tell everyone how to run the ATM business.

And since the government is so good at efficiently running things, I can see why.

Sorry, I'm happy to let my bank set its fees and if I don't like them, I can choose to do business elsewhere.

TP:

Too many people here seem unwilling or unable to get your point.

Pangloss

 

[SVMc]

Banks are already a heavily regulated industry. Any, notion that Canadian Banks are in any way any more at arms length from the Government than transit systems or hydro corporations is a huge mistake.

As long as the government feels that they can (and have) stepped into the business of regulating the banks to the point that banking is not in any way in this country a market economy, to the point that consumers do not have choice, that consumers cannot shop around, then yes, I think it is the citizen's recourse to go the government and have them represent double charging at the banks.

It seems to be less that we are "unable" or "unwilling" to get the free market idea, and more so that those in opposition are living in a fantasy world where banks are not already heavily regulated by the government.

 

[TenPenny]

Banks are already a heavily regulated industry. Any, notion that Canadian Banks are in any way any more at arms length from the Government than transit systems or hydro corporations is a huge mistake.

As long as the government feels that they can (and have) stepped into the business of regulating the banks to the point that banking is not in any way in this country a market economy, to the point that consumers do not have choice, that consumers cannot shop around, then yes, I think it is the citizen's recourse to go the government and have them represent double charging at the banks.

It seems to be less that we are "unable" or "unwilling" to get the free market idea, and more so that those in opposition are living in a fantasy world where banks are not already heavily regulated by the government.

About the only statement you make that is true, is that banking is a heavily regulated industry. The rest is pretty much unadulterated crap.

 

[SVMc]

Pardon me while I choose not to accept name calling in lieu of an argument.

At least we can finally get an acknowledgement that banking is a heavily regulated industry. Just for clarifications sake I will reiterate that it is heavily regulated by the government.

Now I realize that saying that someone else's argument is "unadulterated crap" may be easier than actually leveling support for your own argument, but I'll persist anyways.

First off I agree that if we had a banking system that was not heavily regulated by the government, to the point that the barriers of entry for new competition are so steep that no new competition is being generated and if we had choice then it would be within the market mechanisms for me as a consumer to go out and shop for my choice. Ideally in a market economy system where a consumer need was not being met another competitor would open up and fill that consumer need.

However, the banking industry is so heavily regulated by the government that there is no new real competition. The only alternatives that people have even been able to come close to referencing are ING which does not offer day-to-day chequing services and PC which has no actual branches and cannot offer the portfolio of services of other banks.

The Bank of Canada reaches the following conclusion:

A goal of policy-makers is to facilitate a banking system that best promotes economic efficiency and stability. The traditional perception is that there is a clear trade-off between these two goals. A review of the theoretical and empirical literature, however, suggests otherwise.

There is a growing consensus in the literature that the traditional approach of equating few banks or concentration with market power is not enough. Concentration is not in itself a sufficient indicator of competitive behaviour. Other important factors are involved, such as less-severe entry restrictions, the presence of foreign banks, few restrictions on the activities that banks can perform, well-developed financial systems, the effect of branch networks, and the effect and use of technological advancements. Because it requires an understanding of these various factors, an assessment of contestability in the banking sector can be very difficult and is likely to be specific to a particular country at a particular time.

Working Paper 2004-24 / Document de travail 2004-24, Competition in Banking:: A Review of the Literature by Carol Ann Northcott

In short arguing that there is a concentration of bank branches does not equal market competition, and that even the banks think there isn't enough competition.

For reference, Canada has a total of 44 banks (at the time of the above paper) and the three largest banks have 54% of the market share (we have 5 large banks), the UK has 186 banks with the three largest banks having 34% of the market share, and the US has 717 banks with the three largest banks having 15% of the market share.

So, if we can establish that competition is a problem in the Canadian Banking industry as in there is a significant lack of competition, and competition is the cornerstone of market economies, and that one of the primary reasons that there is a lack of competition in Canadian Banking is barriers to entry which are largely regulated by the Government of Canada. We can then conclude that the Government of Canada has created a banking system with very little competition available for the consumer to shop.

In other words, we are fast running out of ability to shop around for a better deal.

In a situation where the consumer has no choice then the consumer is at the mercy of the (in this case) oligopoly. The merchant no longer needs to meet the needs of the consumer because there is no competition for the consumer to go to.

Which leaves the consumer no option but to ask the government to intervene in a situation that the government significantly helped to create in the first place.

Again, no one is saying that the consumer should not have to pay for service. The argument is that where there is a significant portion of consumers that feel that they are being fleeced by a government sanctioned oligopoly then it is even poorer consumer choice not to go to the government and demand action.

 

[TenPenny]

Pardon me while I choose not to accept name calling in lieu of an argument.

Name calling? What name calling?

Have another beer. You need it.

 

[SVMc]

Well I've had my JR Brickman Honey Red Lager (Craft Beer du jour) and I still think that saying:

TenPenny: About the only statement you make that is true, is that banking is a heavily regulated industry. The rest is pretty much unadulterated crap.

Does not constitute a counter argument, so I'll try again:

SVMc: At least we can finally get an acknowledgement that banking is a heavily regulated industry. Just for clarifications sake I will reiterate that it is heavily regulated by the government.

Now I realize that saying that someone else's argument is "unadulterated crap" may be easier than actually leveling support for your own argument, but I'll persist anyways.

First off I agree that if we had a banking system that was not heavily regulated by the government, to the point that the barriers of entry for new competition are so steep that no new competition is being generated and if we had choice then it would be within the market mechanisms for me as a consumer to go out and shop for my choice. Ideally in a market economy system where a consumer need was not being met another competitor would open up and fill that consumer need.

However, the banking industry is so heavily regulated by the government that there is no new real competition. The only alternatives that people have even been able to come close to referencing are ING which does not offer day-to-day chequing services and PC which has no actual branches and cannot offer the portfolio of services of other banks.

The Bank of Canada reaches the following conclusion:

A goal of policy-makers is to facilitate a banking system that best promotes economic efficiency and stability. The traditional perception is that there is a clear trade-off between these two goals. A review of the theoretical and empirical literature, however, suggests otherwise.

There is a growing consensus in the literature that the traditional approach of equating few banks or concentration with market power is not enough. Concentration is not in itself a sufficient indicator of competitive behaviour. Other important factors are involved, such as less-severe entry restrictions, the presence of foreign banks, few restrictions on the activities that banks can perform, well-developed financial systems, the effect of branch networks, and the effect and use of technological advancements. Because it requires an understanding of these various factors, an assessment of contestability in the banking sector can be very difficult and is likely to be specific to a particular country at a particular time.

Working Paper 2004-24 / Document de travail 2004-24, Competition in Banking:: A Review of the Literature by Carol Ann Northcott

In short arguing that there is a concentration of bank branches does not equal market competition, and that even the banks think there isn't enough competition.

For reference, Canada has a total of 44 banks (at the time of the above paper) and the three largest banks have 54% of the market share (we have 5 large banks), the UK has 186 banks with the three largest banks having 34% of the market share, and the US has 717 banks with the three largest banks having 15% of the market share.

So, if we can establish that competition is a problem in the Canadian Banking industry as in there is a significant lack of competition, and competition is the cornerstone of market economies, and that one of the primary reasons that there is a lack of competition in Canadian Banking is barriers to entry which are largely regulated by the Government of Canada. We can then conclude that the Government of Canada has created a banking system with very little competition available for the consumer to shop.

In other words, we are fast running out of ability to shop around for a better deal.

In a situation where the consumer has no choice then the consumer is at the mercy of the (in this case) oligopoly. The merchant no longer needs to meet the needs of the consumer because there is no competition for the consumer to go to.

Which leaves the consumer no option but to ask the government to intervene in a situation that the government significantly helped to create in the first place.

Again, no one is saying that the consumer should not have to pay for service. The argument is that where there is a significant portion of consumers that feel that they are being fleeced by a government sanctioned oligopoly then it is even poorer consumer choice not to go to the government and demand action.

 

[TenPenny]

Well I've had my JR Brickman Honey Red Lager (Craft Beer du jour) and I still think that saying:

Does not constitute a counter argument, so I'll try again:

I never said it doesn't constitute a counter argument. You said I was name calling, and I disagreed.

Sharpen up your reading skills. I never said it didn't constitute a counter argument.

I said, and I will repeat, that I don't understand why people who don't want to pay ATM fees can't simply use the many methods available to access their money without ATM fees. There are many ways to do this, but people seem incapable of figuring it out. I don't think we need to write laws to counter lazy people.

 

[SVMc]

TenPenny: Sharpen up your reading skills. I never said it didn't constitute a counter argument.

Funny that you say that when I have now three times said that you have not provided one counter-argument to the points I and others have presented. Just in case I'm not being consistent enough here are the points I made in response to your assertion:

TenPenny's assertion:

There are many ways to do your banking without paying atm fees.

Response

At least we can finally get an acknowledgement that banking is a heavily regulated industry. Just for clarifications sake I will reiterate that it is heavily regulated by the government.

Now I realize that saying that someone else's argument is "unadulterated crap" may be easier than actually leveling support for your own argument, but I'll persist anyways.

First off I agree that if we had a banking system that was not heavily regulated by the government, to the point that the barriers of entry for new competition are so steep that no new competition is being generated and if we had choice then it would be within the market mechanisms for me as a consumer to go out and shop for my choice. Ideally in a market economy system where a consumer need was not being met another competitor would open up and fill that consumer need.

However, the banking industry is so heavily regulated by the government that there is no new real competition. The only alternatives that people have even been able to come close to referencing are ING which does not offer day-to-day chequing services and PC which has no actual branches and cannot offer the portfolio of services of other banks.

The Bank of Canada reaches the following conclusion:

Quote:

A goal of policy-makers is to facilitate a banking system that best promotes economic efficiency and stability. The traditional perception is that there is a clear trade-off between these two goals. A review of the theoretical and empirical literature, however, suggests otherwise.

There is a growing consensus in the literature that the traditional approach of equating few banks or concentration with market power is not enough. Concentration is not in itself a sufficient indicator of competitive behaviour. Other important factors are involved, such as less-severe entry restrictions, the presence of foreign banks, few restrictions on the activities that banks can perform, well-developed financial systems, the effect of branch networks, and the effect and use of technological advancements. Because it requires an understanding of these various factors, an assessment of contestability in the banking sector can be very difficult and is likely to be specific to a particular country at a particular time.

Working Paper 2004-24 / Document de travail 2004-24, Competition in Banking:: A Review of the Literature by Carol Ann Northcott

In short arguing that there is a concentration of bank branches does not equal market competition, and that even the banks think there isn't enough competition.

For reference, Canada has a total of 44 banks (at the time of the above paper) and the three largest banks have 54% of the market share (we have 5 large banks), the UK has 186 banks with the three largest banks having 34% of the market share, and the US has 717 banks with the three largest banks having 15% of the market share.

So, if we can establish that competition is a problem in the Canadian Banking industry as in there is a significant lack of competition, and competition is the cornerstone of market economies, and that one of the primary reasons that there is a lack of competition in Canadian Banking is barriers to entry which are largely regulated by the Government of Canada. We can then conclude that the Government of Canada has created a banking system with very little competition available for the consumer to shop.

In other words, we are fast running out of ability to shop around for a better deal.

In a situation where the consumer has no choice then the consumer is at the mercy of the (in this case) oligopoly. The merchant no longer needs to meet the needs of the consumer because there is no competition for the consumer to go to.

Which leaves the consumer no option but to ask the government to intervene in a situation that the government significantly helped to create in the first place.

Again, no one is saying that the consumer should not have to pay for service. The argument is that where there is a significant portion of consumers that feel that they are being fleeced by a government sanctioned oligopoly then it is even poorer consumer choice not to go to the government and demand action.

In case you're new to the concept of debate, the typical way this works is that an argument is presented, and then debating parties not only say their side of the argument but also provide rationales and even support for their arguments.

When points are raised you counter the points. For example your assertion has been that there should be no bill against ATM fees since the consumer has choice, there is a response above (and by several others) to your response, but you keep ducking the reply and simply restate your position without any support or rationale.

It seems that when confronted with arguments containing rationale and / or support your only recourse is to say:

TenPenny: The rest is pretty much unadulterated crap.

Which is not an argument of any kind, nor is simply restating your position.

Now, I'm not claiming I have it right, but I am claiming that I've presented an argument, with a rationale and supporting points which is more than has been presented by an alternate viewpoint.

So, we can both (metaphorically) cover our ears and scream "lalalalala, I'm right, I'm right, I'm right" but that's a waste of a good opportunity for thought out debate. If you don't find it interesting debating this subject or having your views on this subject challenged, you can always opt out.

 

[TenPenny]

Funny that you say that when I have now three times said that you have not provided one counter-argument to the points I and others have presented. Just in case I'm not being consistent enough here are the points I made in response to your assertion:

Why on earth do you think I consider your drivel worthy of debate? Just because you demand I argue each point, does not mean I comply. You are far from being important enough to me that I would bother elaborating on what I said many posts ago.

You can choose to disagree by going off on long wandering tangents about your interpretation of the state of competition in the banking industry if you want.

Personally, I think that most of what you posted is unadulterated crap, and I can't be bothered to explain why. I just don't care about you, or your argument, because I think it is so flawed it's not worth getting into.

The fact that you started one post by trying to pretend I made a personal insult just simply removes any possible value from anything else you posted, because you are so blatantly twisting things. You blew your chance to be taken seriously; I never expected to be taken seriously in the first place. I don't care if you agree with me or not. It makes no difference whatsoever.

Have a nice day.