Joe Issa-Gov't to Stop Predatory Charges by Banks

Former commercial bank director Joe Issa has described as ‘doing the right thing right’ the government's commitment to stop banks charging predatory charges by making it easier for customers to switch their accounts to other banks where those charges are more reasonable.

Issa, who is a known supporter of a free market system, said “it is all about encouraging competition among the banks to get them to reduce their charges, and not about meddling in the market by dictating what banks should charge.

“As the Minister has said, and I agree, if the fees are too high at one bank, then it should be easy for customers to move their deposit accounts to the bank that is charging reasonable rates.

“Therefore, the right thing to do is to force them to lower their fees through competition, and facilitating the process by making it easier for customers to switch banks,” Issa said, adding, “It is like doing the right thing, right.”

Issa was commenting on a Jamaica Observer report on Finance Minister Audley Shaw’s recent budget presentation in Parliament, in which he was quoted as saying, “If fees are too high at one bank, then it should be easy to move your deposit accounts to the bank that is charging reasonable rates. However, more has to be done to make switching deposit accounts between banks easy and hassle-free.”

He reportedly said that to push banks to keep their fees competitive, the Government would implement a time-bound action plan to stop “predatory charges” by financial institutions.

“It is not beyond us to envision bank customers being able to sign a single form (paper or electronic) authorising the new bank of their choice to execute the related processing work on your behalf, without a need to repeat the 'know your customer' process, having already completed it at the bank from which you are switching.

“We are well aware that principles and standards to govern bank switching would need to be formulated by the Bank of Jamaica so as not to diminish the integrity of the financial system. We believe this to be a better and more sustainable approach to increasing competition among banks, thus resulting in lower fees, than the proposed one-size-fits-all regulation of banking fees,” he reportedly stated.

 

Minister Audley Shaw in Parliament Credit Michael Gordon

The finance minister pointed out that the Government of Jamaica itself has also been impacted by onerous commercial bank policies, pointing to numerous dormant accounts of public entities with large cash balances at commercial banks, which he said his Administration found on taking office in 2016.

“We also confirmed that the banks were also applying charges to those balances. We have written to the banks to cease from this onerous policy, both for the public and for the Government,” he reportedly said.

According to the article, Shaw said the strategy will include a review of the Banking Services Act, the entrenchment of the Bank of Jamaica (BoJ) Code of Conduct for deposit-taking institutions which was introduced in September 2017, and the formal establishment of a financial consumer protection entity, either as a separate agency or as a division of the Consumer Affairs Commission.

It said Shaw had indicated, while amendments to the Banking Services Act were being debated last year, that the Government would move to introduce a financial services consumer protection agency.

It is not the first time that Issa is supporting the free market mechanism. In a 2015 blog on the role of banks in national development, he was cited urging a more competitive banking environment with cheaper and better products and services, instead of calling for the BoJ to put a cap on bank fees. 

“I do not believe capping bank fees is the best solution [to keep fees low],” the executive chairman of Cool Group said in the blog, stating, “I would rather leave it to the free market to determine.”

It said Issa’s view was supported by no less than BoJ Governor Brian Wynter and Executive Director of Private Sector Organization of Jamaica (PSOJ) Dennis Chong, who backs market forces to determine the price of banking services.