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Senate to examine bank fees

IDNUMBER 200903020025
PUBLICATION: The StarPhoenix (Saskatoon)
DATE: 2009.03.02
SECTION: National
ILLUSTRATION: Colour Photo: Photo Supplied / The Senate banking committeeis holding hearings about higher bank fees and borrowing costs ;
BYLINE: Sarah Schmidt
SOURCE: Canwest News Service

Senate to examine bank fees

Some CIBC customers who want to withdraw money from their own bank account will soon see the fee go up a nickel to 65 cents on certain transactions.

If they turn to their line of credit to pay bills, they -- like customers of most major banks -- will notice an increase in the interest rate after a short-lived drop when the Bank of Canada cut its prime lending rate earlier this year.

And if consumers use their credit card at shops, retailers are now paying higher transaction fees, set by credit card companies and paid to the issuing banks. These fees, totalling more than $4.5 billion last year, trickle down to consumers through higher price tags.

With consumers feeling choked at every turn during the current economic downturn, parliamentarians are set to grill Canada's banks and credit-card companies about what is driving higher fees and borrowing costs at a time when the central bank's benchmark lending rate is at a historic low and the companies are reporting healthy profits.

The Senate banking committee is set to launch hearings this month at the urging of New Brunswick Liberal Senator Pierrette Ringuette.

"This is a major source of frustration right now, almost outcry, by the way those fees are being increased -- whether it's fees from the credit cards towards the business community or credit cards toward the consumers," she said.

The business associations also have a fresh concern about the push by Visa and MasterCard to enter Canada's debit market. Interac, the non-profit association that dominates the debit market, has already applied to the Competition Bureau to become a profit-driven operation in anticipation of a shakeup, and merchants are warning of increased debit fees for businesses and consumers if the restructuring of the debit market occurs.

Glenn Thibeault, consumers affairs critic for the New Democrats, says the coming showdown over Interac and the debit market makes the Senate hearings all the more pressing after "lots of talk but no action" on the part of the Conservative government to protect consumers.

"Here, again, these companies are going to be making billions of dollars on the backs of consumers and on the backs of small businesses."

Tim Wilson, head of Visa Canada, says he welcomes a close examination of the business to explain the benefits of the interchange system to retailers and consumers.

"I understand it's a challenging economic time for retailers and they're examining every aspect of their cost base. As to whether we're being unfairly targeted, I think there are a lot of misconceptions in the market about Visa's role in the system and about the cost of accepting cards and the value that those cards drive."