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Canadians paying billions of dollars in 'excess' bank fees



A recent report from Alberta-based consultancy North Economics sheds light on the significant amount of money Canadians are forking out in bank fees each year. As the federal government strives to cut down on these charges, the study unveils that Canadians are overpaying by billions of dollars annually.


The report scrutinized fees at the Canadian Big Five banks—RBC, TD, BMO, CIBC, and Scotiabank—and compared them with those in the U.K. and Australia. The findings are stark, revealing that Canadians are shelling out considerably more each month for various bank services, including account maintenance, non-sufficient funds penalties, overdraft charges, and accessing ATMs at competitor banks.


To gauge the extent of the disparity, North Economics managing director Alain de Bossart examined the ratio of retail banking profits to deposits in Canada and the U.K. for 2022. The results indicate that Canada's major banks accumulated $7.73 billion in "excess" income, translating to approximately $250 per Canadian.


De Bossart emphasized, "Canadian banks have done a very good job of extracting as many fees out of people as possible." He noted the stark contrast between Canada and the U.K., where multiple bank accounts can be held without incurring monthly charges, a practice virtually unheard of in Canada.


The report underscores that major banks in the U.K. and Australia provide free accounts to all consumers and impose either no fees or only a minimal amount for non-sufficient funds. In contrast, Canadian banks charge between $45 and $50 for each occurrence.


Finance Minister Chrystia Freeland's efforts to enhance low-cost banking options and lower non-sufficient fund fees have yet to materialize, prompting de Bossart to investigate the issue further.


The report highlights that Canadian banks typically charge $5 for overdraft protection, whereas U.K. banks either charge nothing or apply higher interest rates on the overdrafted amount. Additionally, Canadian consumers often face multiple fees when using an ATM at a bank where they lack an account, ranging from $1 to $9, while their counterparts in Australia and the U.K. face no such charges.


The Canadian Bankers Association, represented by spokeswoman Maggie Cheung, defended the country's banking system, asserting that it offers good value, accessibility, and a wide choice for consumers and businesses. However, the report suggests that there is no free banking option available to all Canadians, with no-cost accounts limited to specific groups such as young people, students, and seniors.


While some customers can avoid fees by maintaining a high account balance, the report notes that the required amount can range from $3,000 to $6,000, limiting the potential for higher interest rates in alternative accounts.


De Bossart attributes the lower fees in the U.K. and Australia to regulators having a stronger mandate to encourage competition, a concept not extensively considered in the Canadian regulatory landscape. The report underscores the need for Canada to address the issue of excessive bank fees, echoing the ongoing government push for more affordable banking options for Canadians.


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