The fee free-for-all at Canada’s banks

Why Joe Oliver’s no-fee banking announcement was pure political theatre

Darryl Dyck/CP

Darryl Dyck/CP

Somebody should tell Joe Oliver he’s doing it all wrong. When you’re a Conservative finance minister trying to score points by taking a page from the NDP’s populist guidebook to herding bank CEOs, it might help to use terms like “greedy” and “fat cat,” sprinkled with liberal references to bursting bank vaults and overpaid executives. Yet none of that was on display when Oliver announced Canada’s eight largest banks will offer new low-fee and no-fee accounts to Canadians. I suppose that’s not such a surprise. The business press did trumpet Oliver’s appointment to the finance portfolio in March with the headline: “Bay Street gets its man.”

After reminding Canadians of his financial services bona fides—“You don’t have to spend decades raising capital like I did to know that having a bank account is crucial”—the former investment banker and securities regulator fired another volley in the government’s ongoing consumer rights crusade, a campaign as heavy on rhetoric about cross-border prices and naughty cellphone companies as it is light on logic. And so it is here with this latest scheme. The eight banks agree to make free accounts available to youth, students, low-income seniors and those living on disability. The low-cost accounts, meanwhile, will be available to other Canadians, with a fee capped at $4 per month. The new guidelines kick in next January.

You might be confused at this point, wondering, “But don’t some banks already offer no-fee accounts?” Why yes, yes they do. One is President’s Choice Financial, the grocery store bank. So do some credit unions. And so does Tangerine, the Bank of Nova Scotia subsidiary formerly known as ING Direct, once famous for its Dutch spokesman. One could almost hear echoes of that pitchman in Oliver’s speech as he said, “You work hard for your money; you deserve to keep more of it in your pocket.”

Put simply, the Conservatives muscled banks to offer a service that some banks already offer. If any further evidence was needed that this was pure political theatre, Oliver made sure to time the announcement amidst a week of blockbuster bank earnings. (Really, is there any other kind?) Over the span of a few days, Toronto-Dominion Bank, Royal Bank of Canada and Scotiabank each posted quarterly profits of between $1.8 and $2.2 billion, with more banks to report in the following days.

While the new rules target those with the lowest incomes and least assets, it was already relatively easy for that group to switch to a bank offering no-fee accounts. Instead, the new rules will most likely benefit wealthier clients with entrenched banking relationships—for instance, those customers with a mortgage, car loan, credit card, investment account and chequing account all at a single institution—who, either by choice or sheer laziness, have opted not to shop around. It’s certainly not a class of bank customer deserving of government intervention and protection. Now, courtesy of the Harper government, those bank customers may get a chance to switch to new low-cost accounts for $4 a month, rather than the $15 or $20 they might otherwise pay. But who’s fooling who? The bank will make up the difference with extra fees elsewhere.

By the government’s own estimate, seven million Canadians will have access to no-cost accounts starting next year, saving them, Oliver said, roughly $50 each a year. (That sound you heard was the collective air rushing out of the press conference when Oliver announced the tiny windfall, which is why most stories have ignored it and focused on the figure of seven million people instead.)

But let’s assume for a moment all those people pocket their $50 rather than fork it over to their bank. That’s $350 million. Spread out across all the institutions it’s hardly enough to break the bank, so to speak, but it’s not an insignificant sum either. We already know the banks will make up the difference. But still, why agree, with so little fuss, to forgo fees in the first place?

It’s not a stretch to assume the answer lies in the abrupt change in tone around mortgage rates and the housing market since Oliver took over at finance. While the late Jim Flaherty, wary of Canada’s teetering housing market and household debt levels—and the risk to taxpayers through the Canada Mortgage and Housing Corp.—famously and publicly berated the Bank of Montreal for slashing five-year fixed rates to 2.99 per cent, Oliver took a hands-off approach as BMO revived its 2.99 per cent rate, as RBC borrowed from the car industry and offered employee pricing on mortgages and as Investors Group unveiled a three-year variable mortgage rate of 1.99 per cent. Oliver has since said he sees no risk of overheating in the housing market. “We don’t think we are confronting a crisis,” he told CTV last week.

Sometime soon, possibly this year, TD and RBC will each see their total assets on their balance sheets cross the $1 trillion threshold, having roughly tripled in size in a decade. (Just four U.S. banks in the giant American economy have crossed into 13-digit territory). That growth wasn’t from bank account fees. If the price of peace on the all-important mortgage front is some forgone and easily recoverable fee revenue, while playing a bit role in the government’s consumer rights sideshow, any banker—even Joe Oliver—would tell you that’s a deal worth making.


The fee free-for-all at Canada’s banks

  1. LoL -this is the old “bait n switch” sales tactic 101 in action.

    “The bank(s) will make up the difference with extra fees elsewhere….”

    You could easily substitute “bank(s)”, with Oil Corp’s, our present Gov’t, …, heck just make that any and all of Corporate Canada. -they serve only themselves and therefore, only the rich “CEOs,“greedy” and “fat cat,…” 1% here. -nuthin new, and thus our Gov’t, of course, supports it.
    -this truly is “Political Theatre”.
    Oliver: “…Please Sir, I want some more…?”

    • Businesses that don’t make money don’t stay in business for very long.

  2. The Harper Regime – All politics, despicable governance.

    • Yep, its all about tax greed. 1/2 the cost of operating a bank branch can be chased down to taxes to one greedy government or another.

      Governemtn wants to vilify Putin, banks, rich and others as so people do not look at who is the real reaper of peoples wealth, Statism governments, 5 layers of it: city, prov, Ottawa, FN and mafia.

      Ottawa+province budgets are $630 billion total in a $1.8 trillion economy, 35% of everything goes to governemtn nation wide and gov-media sources will blame gas costs, banks, companies, even Putin…

      We are well conditioned in public school and media never to question our governments wastes of our money. But buddy/lobby corporate, bank, union, provincial, city uncommon good bailouts, inflated contracts to make select people rich, the uncommon good welfare are not free.

      Government is you slave master. You don’t even see all the taxes you pay as we do tax food and essentials in Canada. $45 billion/years worth of hidden taxes.

      To show the propaganda, take state owned corporate welfare CBC Marketplace. Has a whole hour segment on why Canadian prices are so high, vilifies retailers yet totally ignores the $45 billion CBSA hidden tax revenues we all pay. Not one mention of the largest reason our costs are so high.

      But that is Orwellian statism. 3 placatory left, centre and right parties, all statism parties and none are for personal liberty. We are trained to think one dimpentional NDP/Lib/Con yet not to examine Statism versus Liberty.

  3. Several years ago, the Four Corners Bank in Vancouver’s downtown east side was highly touted for its no-fee bank accounts. It was pointed out that many low income earners didn’t have access to banking, and instead had to rely on carrying cash and using payday loan companies to cash cheques. It’s great that there are a couple of banks with no fee accounts, but you’ll note that they don’t have many locations for customer service, and the locations that they have are poorly located to serve many low income earners. PC Banking is great if you’ve got a car in suburbia; not so helpful if you’re living in a single-room occupancy hotel in an urban area. Sure, this is political theater, but I don’t think it’s as inconsequential as you allege.

  4. I am a conservative but I have left the Conservative ranks. Further, I don’t pay fees except for $9.99 per stock trade which is a actually a good deal. I keep a $5000 balance, and no fees on the 7 accounts I have, 5 investment accounts (RRSP, LIF, TFSA, Cash, US Cash), 2 for income account and household spending account, and my wifes RRSP and TFSA for two more.

    Not one account charges me fees. I never run over draft, I always pay my credit card in full every month. We visit the branch once a month for cash, being low maintenance types.

    Conservatives are jumping on a hate bandwagon. Vilify banks for debtors and misuser’s of money, pandering to people who have no respect for money and/or too lazy to shop around.

    Conservatives should be worrying about what is really killing this country.

    You have to earn $1,400,000 to pay $700,000 in taxes, $300,000 in fair interest, to buy a $400,000 home that is $200,000 in labour, fees, tariffs and other taxes to biuld the $200,000 home. Yep, government gets $900,000, banks lend you money to get $300,000 and you get a $200,000 tax-debt out home.

    GOVERNMENT GREED is the most expensive item in your life…. In above, it doesn’t include the city/utility/property taxes and taxes on food, clothing and protectionism!!!

    We don’t have as many jobs as government has debt-inflated prices, needed uncompetitive wages and results in job loses.

    We don’t have money left in our jeans so we have fewer kids as new adults can only afford a one bed condo and not a family home.

    We don’t have the money left in our jeans to spend as much on other peoples jobs as we are too busy paying for government.

    And stupid Conservative party is worryed about $4/month in serive fees by banks…..

    I call this statism GREED. So blinded by the the immorality, they try to focus blame on others so they have lots of money for corporate, union, bank, provicnical, city uncommon good bailouts and inflated buddy contracts.

    Just statism greed.

  5. What no one is discussing is what are the fees for? There is a big difference in a monthly account fee and a NSF charge. I do agree month fees where low or no activity has occurred, like TFSA, RRSPs is wrong. But the answer is to shop around. Walk right up to a banks counter, ask straight out, you are looking for no fee checking, no fee TFSA, no fee RRSP and no fee investment accounts other than the stock/buy transaction fees.

    Options do exist, do not be afraid to switch. As you pass through phases of life, being a student, then young adult, from mortgage owner towards being a real home owner, from not much money to a healthy savings rate….. you need to move your accounts occasionally as one bank does NOT fit all walks of life.

    Some banks are better at young peoples needs, some are better for chronic debtors than others, some are better for investors and savers….

    But know, Conservatives need a kick here. What they are doing is vilify Putin, banks, anyone else but the biggest cause of economic grief in the land…. our own governments.

    You have to earn $1,400,000 to pay $700,000 in taxes, $300,000 in fair interest, to buy a $400,000 home that is $200,000 in labour, fees, tariffs and other taxes to biuld the $200,000 home.

    Mexican earns $200,000 to pay $40,000 in taxes, $40,000 in interest to buy a $120,000 home. (Also pays a whole lost less in city/utility/education taxes too).

    American earns $360,000 to pay $60,000 in taxes, $50,000 in interest to buy a $250,000 home. (Also pays a whole lost less in city/utility/education taxes too).

    My buddy in USA had his roof done, $6200, me, its costing me $12,800 for near identical home. As in Canada were are taxed like slaves.

    Is why our jobs leave Canada, and STATISM tax greedy governments want to blame banks, Putin, gas prices….. when the real crime is government takes too much.

  6. Lets take account fees. Most accounts give you a break for doing electronic and not paper statements. If you pay your bills electronically, the bank has no paper or postage to manage. Canada Post has some of the highest rates in the world….a crown corp like CBC, they are anti-competitive….

    But while governments get most of your income from income and hidden spend side taxes, tariffs, protectionism taxes and the like, we rather worry about 10 cents a litre and banks fees?

    Not much has less than 50% tax in it when you cosnider not only income, but how taxes affect and are in the spend side. CBSA collects $45 billion/year in hidden taxes….

    Harper is hoping people hate Putin, banks, corporations, rich and get people NOT to look at the biggest pillager of wealth in anyones life, government. Its called blame deflection and conflict management. Get people to hate each other and they will not hate government that takes our wealth and does very little for it.

    We are a well managed peoples. Its why they don’t teach real economics to kids, they might question the costs of government. Might figure out the reason we lose jobs to USA, Mexico, China and others is because we need uncompetitive high wages to live in debt-tax inflated and depreciating Canada.

    Yep, government wants you to bash banks, bash gasoline providers…but hey Ottawa, what do you do for much more money and we get so very little of value in return?

    Me, I am not naive to the propaganda, the big pig on peoples wealth is government of declining value.

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