(Toronto) While the federal government would like to see a reduction in bank fees, a report from consulting firm North Economics estimates that Canadians are overpaying billions of dollars per year.
The Alberta-based company’s report compares fees charged by Canada’s big five banks – RBC, TD, BMO, CIBC and Scotiabank – with those faced by consumers in the United Kingdom and Australia.
It shows that Canadians are paying significantly more each month for their bank accounts, as well as for overdraft fees, linked to insufficient funds, and for access to ATMs at competing banks.
To get an idea of how much extra Canadians are paying, North Economics managing director Alain de Bossart compared the profits of interest-free retail banks in Canada and the United Kingdom with their deposits. The measure excludes interest-based profits from mortgages and other loans.
Using the ratio of retail bank profits to deposits for 2022, it found that Canada’s five largest banks had $7.73 billion in “excess” revenue. This figure equates to approximately $250 per Canadian.
“Canadian banks have done a very good job of imposing as many fees on people as possible,” said Mr. de Bossart.
He said he had wanted to explore the issue further since he moved to Canada from the UK about seven years ago.
“The first thing that struck me was that you almost have to pay a monthly fee just to let a bank hold your daily deposits,” de Bossart said.
“In the UK, you can hold multiple bank accounts with multiple banks and expect to pay no monthly fees for a bank account that allows you to do everything you could reasonably expect to do in a month,” he said. -he adds.
Easy access and a wide choice
The Canadian Bankers Association has argued that Canada’s banks provide the tools Canadians and small businesses need to manage their finances.
“Our country’s competitive banking system provides value for money, easy access and wide choice for consumers and businesses,” spokeswoman Maggie Cheung said in a written statement. The banking industry understands the importance of financial well-being for all Canadians and that many Canadians are feeling added pressure on their budgets. »
The report highlights that as well as offering free accounts to all consumers, major banks in the UK and Australia charge nothing or just a few dollars when a customer is faced with insufficient funds. Canadian banks charge between $45 and $50 each time.
Finance Minister Chrystia Freeland has pushed to improve low-cost banking options and reduce non-sufficient funds fees, but she has not yet achieved her goal, which Mr. de Bossart says is the cause. prompted attention to the issue.
The report also notes that Canadian banks generally charge $5 for overdraft protection, either on a monthly or flexible basis, whereas British banks charge nothing (although British banks charge higher interest on the overdraft amount). discovered).
Canadians also often face multiple fees when using the ATM of a bank where they do not have an account, which can range from $1 to $9, while consumers in Australia and the United Kingdom Uni pay nothing, he said.
Mme Cheung pointed out that, according to recent data from the Bank of Canada, about 57 per cent of Canadians pay nothing for a bank account or have had their monthly fees waived or refunded.
No-fee accounts are available for groups like youth, students and seniors, but the North Economics report notes that no free option is available to all Canadians.
He also points out that while customers can avoid paying fees if they keep a high enough balance in their account, that amount can range from $3,000 to $6,000. This means that the flat rate plan does not allow generating more funds through another account with better interest rates.
Mr De Bossart said lower fees in the UK and Australia are partly because regulators have a stronger mandate to encourage competition, including by making it easier to switch accounts.
“The regulatory mandate actually includes a competition mandate, so the idea of promoting and improving competitive behavior in the marketplace, whereas in Canada, that’s really not something that’s contemplated.” , he argued.