OTTAWA - The country's eight largest banks have agreed to expand low-cost and no-cost banking services for Canadians, Finance Minister Joe Oliver announced Tuesday.
The initiative comes as a result of negotiations between the government and the banks following a commitment in last year's Throne Speech and in the most recent budget on cheap access to banking services.
The budget promised the government would work with financial institutions to expand no-cost banking services for youth, students and low-income seniors who qualify under the guaranteed income supplement and the registered disability savings plan.
Under the new rules, which take effect on Jan. 15, 2015, banks will offer the financially vulnerable groups no-cost accounts with cheque-writing privileges, a minimum of 12 debit transactions per month, including at least two in-branch transactions.
There will also be no extra charges for debit cards, pre-authorized payment forms and monthly printed statements.
Oliver said the changes will leave about $50 a year in the pockets of Canadians who can least afford to pay profitable banks charges on services.
"Canadians deserve the best banking services at the lowest prices," he said. "For Canadians on a fixed income, every dollar counts and $50 can pay for the week's groceries."
He added he is not concerned about the impact on the banks, noting they are very profitable and stable.
Agreeing to implement the new rules were the Royal Bank (TSX:RY), TD Bank (TSX:TD), Scotiabank (TSX:BNS), Bank of Montreal (TSX:BMO), CIBC (TSX:CM), National Bank (TSX:NA), Laurentian Bank (TSX:LB) and HSBC.
The announcement comes on the day Scotiabank reported it had taken in a record haul of $1.8 billion in the second quarter, a 14 per cent improvement from the similar period last year. RBC and TD also posted healthy profits last week.
In a statement, the Canadian Bankers Association said the financial institutions already offer low and no-fee accounts for seniors, youth and students, but had agreed to extend those services, including increasing the number of permitted debit transactions to 12 from eight.
As well, it said "while no major bank charged customers for mailed credit card statements, banks have committed to continue to provide these to customers at no charge."
A recent survey conducted for the CBA suggests about one third of Canadians currently pay no fees by taking "advantage of no-fee packages for seniors, students, youth or new Canadians; maintain a minimum monthly account balance; or choose a no-fee electronic banking package." Another third said they pay $15 or less a month.
Essentially, the measures mean young people, students and low-income seniors will be eligible for the same services at no charge as other Canadians receive on low-fee accounts that charge $4.00 a month.
The no-cost accounts are expected to potentially benefit about seven million Canadians, Oliver said.
Susan Eng of the Canadian Association of Retired Persons said in an interview prior to the announcement that measures to help vulnerable seniors avoid costly fees would be welcome, as would be the elimination of charges for receiving credit card statements by mail.
"No frills, no-cost accounts are important for a certain segment of the population," she said.
"But some of them have serious limitations on them, like if you exceed the number of withdrawals or number of cheques you write, or if you don't keep a minimum balance. So that becomes a real problem for people who don't have a lot of extra money to pay fees."
Last year's Throne Speech signalled that the government plans to announce a string of consumer-friendly policies, including rules limiting charges on pre-paid credit cards and measures to reduce the Canada-U.S. price gap on consumer items.