Big Banks’ temporary cuts of some fees, and credit card, mortgage and loan deferrals for only some customers, are not enough – key measures needed (as U.S. has had for decades) to ensure fair interest rates, fees and service now, and into the future
Big 6 Banks gouged out record profits of more than $46 billion in 2019 – their 10th year in a row of record profits – and have high profits still, so they can afford to help more, as Prime Minister Trudeau said in April
Loopholes also must be closed to ensure banks pay fair share of taxes
FOR IMMEDIATE RELEASE:
Wednesday, October 7, 2020
OTTAWA – Today, Democracy Watch, along with the more than 95,000 people from across Canada who have joined its letter-writing campaign and/or signed its Change.org petition, called on new Finance Minister Chrystia Freeland to work together with all federal parties in this minority government situation to make Canada’s big banks do more to help Canadians and small businesses, and pay their fair share of taxes, now and after the coronavirus crisis.
The U.S. enacted measures decades ago to ensure banks serve everyone fairly and well with fair interest rates and fees, and they apply to the U.S. banks that 4 of Canada’s Big 6 Banks own. In the U.S., Bank of Montreal (BMO) owns BMO Harris Bank, Canadian Imperial Bank of Commerce (CIBC) owns CIBC U.S., Royal Bank of Canada (RBC) owns City National Bank, and Toronto-Dominion Bank (TD) owns TD Bank. See #s 2 and 4 in the list of key changes further below.
The call comes after 5 of Canada’s Big 6 Banks announced they had higher than expected profits in the third quarter of 2020 totalling $9.8 billion (BMO – $1.23B; CIBC – $1.17B ; National – $600m; RBC – $3.2B; Scotiabank – $1.3B; TD – $2.3B). The Big 6 had record profits of more than $46 billion in 2019 – the 10th year in a row, and more than double their 2010 profits. (See Canada’s Big Banks Backgrounder)
Former Finance Minister Bill Morneau boasted in early April that the federal government negotiated with the Big 6 Banks to temporarily cut some credit card interest rates for some customers (but not for small businesses) who request a deferral for a couple of months, and to process small business loans funded by the government, in addition to the up-to-6-month mortgage and loan deferrals and fee reductions the banks have already offered (but again, only for some customers, with the delayed amount still required to be paid later, plus interest).
However, those payment deferrals of about $1 billion will soon run out for most people, including about 760,000 Canadians who have deferred their mortgage and Prime Minister Trudeau stated on April 6th that “we need to see even more action like this going forward because this is a time to think about each other, not about the bottom line.”
“The big banks can afford to do much more to help during this crisis, and must be required by law passed by the federal Liberals and all parties to disclose much more information about how they treat customers and borrowers, and about their profits in every part of their business, to ensure they don’t gouge or abuse anyone and are effectively required to serve everyone fairly and well with fair interest rates and fees,” said Duff Conacher, Co-founder of Democracy Watch.
“The federal government cannot tell if the banks are still gouging or treating customers unfairly in this crisis, and won’t be able to tell post-crisis, because the banks are allowed to keep secret the profit levels in each area of their business, what type of borrowers they approve and reject for loan and credit relief, and how many complaints they are receiving,” said Conacher. “As the U.S. did more than 40 years ago, the federal government must require the banks to disclose this information and more to ensure the banks give everyone who needs it a real break in their loan and credit card payments during the crisis, and serve everyone fairly and well at fair interest rates and fees that give the banks a reasonable profit and not excessive gouging profit levels.”
Canada’s Big 6 Banks reported record profits of more than $46 billion in 2019 – the 10th year in a row, and more than double their 2010 profits. The Big 6 Banks reaped record profits every year for the past 10 years in part by firing thousands of people, shifting jobs overseas (or using temporary foreign workers), cutting services, and hiking fees and credit card interest rates even as the Bank of Canada’s prime rate dropped to record low levels.
The Big 6 Banks also paid their CEOs a total of $75 million in 2019 in salary and bonuses (an average of $12.5 million each).
“The federal Conservatives and Liberals have done nothing since 2010 to stop Canada’s big banks from hiking fees and credit card interest rates to gouge Canadians and more than double their profits to the highest levels of banks world-wide, while reducing service, treating many customers unfairly, and exploiting loopholes to lower the amount they pay in taxes,” said Conacher. “In this time of crisis, and with the minority government, all parties must work together to make key changes to make banks help more now, to finally stop their excessive profits, gouging and abuse of consumers, and to make banks pay their fair share in taxes.”
Just like the initial spending actions taken by the federal and provincial governments were not enough to address the coronavirus crisis, the banks must do more. The Big 6 Banks’ decade of record profits and cuts to their prime lending rates show that they can afford to cut interest rates much more on loans like mortgages etc., and also to cut fees much more, and not raise them again to their gouging, excessive profit levels.
The more than 95,000 voters are calling on federal parties to work together now to require the banks:
- To cut all their interest rates and fees in half now, and cut loan payments entirely for anyone who needs it, without requiring payment or extra interest later;
- To disclose detailed profit reports after fully independent audits and keep rates and fees at reasonably low levels in the future (for example, many U.S. states cap credit card interest rates);
- To empower consumers and increase consumer protection by supporting the creation of an independent, consumer-run bank watchdog group (as recommended by MPs and senators in 1998);
- To disclose approval rates for credit, loans and account services by neighbourhood and type of borrower, and require corrective actions by any bank that discriminates (as the U.S. has required for more than 40 years under the Community Reinvestment Act) as part of their annual Public Accountability Statements);
- To re-open basic banking branches in neighbourhoods (where they closed them in the 1990s) to help get rid of predatory pay-day loan companies (and banking at Canada Post outlets should also be allowed to help ensure everyone has access to basic banking services at fair rates and fees);
- To cut bank executive pay down to a reasonable level (as in some European countries);
- To pay their fair share of taxes now, and in the future, by closing all the loopholes they exploit and (as England and Australia have) imposing an excess profits tax, and;
- Finally, enforcement measures and penalties also need to be strengthened to ensure banks, and other financial institutions, serve everyone fairly and well at fair prices (See Backgrounder on Weak Enforcement of Financial Consumer and Investment Protection)
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FOR MORE INFORMATION, CONTACT:
Duff Conacher, Co-founder of Democracy Watch
Tel: (613) 241-5179
Democracy Watch’s Big Banks Coronavirus Accountability Campaign