Spotlight on banking industry
published:
Friday | February 22, 2008
Dennie Quill, Contributor
Someone had to shine the spotlight on the banking industry. And there is no better person to do so than the minister of industry, investment and commerce. Karl Samuda's recent comments about the high level of bureaucracy encountered in opening a bank account in Jamaica comes at a time when a wave of criticism is swirling around the banking industry. Critics complain that banks are exploiting customers by charging usurious rates. They argue further that banks are no longer service providers, instead they have transformed themselves into profit centres.
It is ridiculous that a customer who is known to a banking institution is asked to provide two or three references to open an account. To my certain knowledge, it is easier to open a bank account in the United States than it is in Jamaica. Banks there require identification and proof of residence and most will only ask for a reference letter if a customer is seeking a loan or negotiating an overdraft facility. Fact is, one can open an account on the Internet and approval takes two to three minutes. Yet Mr Patrick Hylton, president of the Jamaica Bankers Association, reminds us that his members are simply adhering to the requirements of the Proceeds of Crime Act and Bank of Jamaica directives. One understands the need to choke off access to cash by drug dealers and terrorists, but is there no room for discretion?
Consumers squeezed
But customers' concerns go beyond the matter of reference requirements and include the ever-increasing charges for basic services, such as processing loans, providing statements, ATM usage, certificates of balance. Do these charges relate to administrative costs for carrying out these functions or are customers being penalised? Consumers complain of being squeezed by banks who charge high rates for exceeding credit card limits or making late payments, even a day late. There are also the inexplicable 'add on' clauses which only accountants appear to understand.
It is obvious that the comatose consumer organisations in Jamaica do not see the need to examine the charges levied by banks. An active association would be surveying the institutions and informing consumers of the comparative charges to help them make informed choices. And the Bank of Jamaica apparently does not want to rile the banks so it does nothing to curb abuses identified by customers. This state of affairs is unacceptable to all fair-minded persons. Someone somewhere needs to examine the regime governing charges made by financial institutions and lift the veil to ensure greater transparency in the way they operate. For example, how do financial institutions go about daily reconciliation of customers' accounts? And what are the implications of an account being labelled dormant? When a bank holds a cheque for 40 days as 'uncleared effects', is it fair to charge the customer overdraft interest if a cheque comes in?
Time to challenge status quo
There is a case in the English courts at the moment challenging bank charges on overdraft limits. This is after banks have been quietly settling claims for excessive penalties going back six years. Perhaps the time has come for an audacious graduate of the Norman Manley Law School to gather disgruntled bank customers and challenge the status quo.
To illustrate my point that banks are no longer service centres, there was a time when they facilitated the payment of utility bills, so their customers could conveniently do all their transactions in one place, not anymore. Obviously there is no profit to be made and so the banks have decided that this is not worth their while. I am all for people handling their financial affairs judiciously, however, many of these excessive charges fall heavily on the poorest in society who are the ones most likely to be late in their credit card payments or issue a bounced cheque.
I am very cautious with my money, so I would not participate in any of the seemingly lucrative investment schemes, but I sympathise with those who have decided to reject paltry interest rates and go for something better. Underserved and exploited consumers have been driven into the bosom of alternate investment schemes where they can see their money grow. I am worried about sustainability, but the general feeling is that customers will enjoy it while it lasts.
Something has to be done to blunt public anger against the banks and restore confidence in our financial institutions.
Dennie Quill is a veteran journalist who may be reached at denniequill@hotmail.com.
