07/31/2013 08:29 EDT | Updated 09/30/2013 05:12 EDT

How "Pay-to-Pay" Fees Gouge Canadians

Canadian families continue to feel the pinch brought on by the global economic downturn. The combination of stagnant real wages and rising prices for housing, utilities and everyday goods is placing significant financial strain on household budgets. This is why New Democrats have a series of practical proposals to help make life more affordable for Canadians.

Recently, some Canadians have been shocked when they opened their monthly invoice to find a new fee tacked on to their bill. This is because many banks, telecom companies and a variety of other service providers are now charging a fee to customers who wish to receive their monthly bills in the mail.

These so called "pay-to-pay" fees unfairly target seniors, those who do not have regular access to the internet or do not feel comfortable performing such transactions online, and represents yet another unnecessary expense for Canadian families already struggling to pay their bills.

The introduction of "pay-to-pay" fees has been veiled under the guise of environmental responsibility. However, were these companies truly concerned about reducing the amount of paper in circulation, a discount for those who use online billing rather than penalty for those who cannot easily make the transition would have been more appropriate.

It is clear that this practice is purely a cash-grab worth millions of dollars, designed to pad the profits of some of Canada's most lucrative corporations. New Democrats recognize this and are committed to terminating this once and for all.

If the "pay-to-pay" scheme is outrageous, banking fees are even worse. As the sector is controlled by such a small number of firms, the possibility for anti-competitive behavior is present.

Canadians pay approximately $420 million every year for the dubious privilege of withdrawing their own money from automated teller machines (ATMs). This figure represents about five per cent of the biggest banks' revenue.

In contrast to parts of the U.S. and the U.K. where the introduction of regulations has either reduced or capped the cost of withdrawing money from an ATM, most Canadians who want to access their own funds are required to pay unreasonable fees unless they maintain a certain balance.

According to a recent report by the U.S. Senate's Durbin report, each withdrawal from an ATM only costs banks approximately 36 cents. Most banks however, charge customers $1.75 to $3 to withdraw cash. The "free" ATM usage that some banks offer is actually covered by a monthly service fee that customers pay, which ranges from $10-$30 depending on the package.

Given that approximately 97 per cent of ATM withdrawals in the U.K. remain free of charge, with a similar trend towards lower ATM fees emerging in the U.S., a 50 cent cap on banking transaction fees for Canadian consumers would be a reasonable balance between protecting consumers without compromising banks' ability to collect a healthy profit.

Perhaps even more egregious than exorbitant ATM fees are predatory short-term lenders.

These businesses are often designed to take advantage of the most vulnerable Canadians -- charging effective interest rates of 60 per cent and higher, despite Criminal Code provisions that prohibit this.

While it is the federal government's responsibility to protect Canadians from predatory lending practices, the Conservatives, like the Liberals before them, are turning a blind eye. Section 347 of the Criminal Code makes it a criminal offence to charge an annual interest rate greater than 60 per cent. However, on the Conservatives' watch payday lenders are charging usurious rates with impunity, trapping Canadians who are struggling to make ends meet in an insurmountable cycle of debt.

Someone who takes out a $400 payday loan for just 17 days would be required repay approximately $450 including interest and fees. That amounts to an extortionate annual interest rate of over 1200 per cent.

Under the New Democrat proposal to rein in predatory payday lenders, we would develop national regulations to protect Canadians from being gouged by firstly banning fees that push effective lending rates beyond the already exorbitant 60 per cent rate which is permitted under the criminal code.

It should be no surprise to Canadians that the Conservatives have done nothing to address these issues; in fact, they're moving backwards having just raised taxes on thousands of everyday goods for consumers. Only New Democrats can be trusted to present cogent alternatives designed to protect consumers from excessive fees and anti-competitive market practices which strip you and your family of your hard earned money.

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