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Consumer Chief Urges More Banking Licenses

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Consumer Protection Commission’s (CPC) chairman yesterday queried whether new banking licenses were required to boost competition, after a majority of Bahamians blasted the industry’s fee-related practices.

Jerome Gomez expressed hope that the findings of the Commission’s newly-released consumer survey on commercial banking practices would stimulate discussion on whether further reforms and controls needed to be imposed on the sector.

He was speaking after the survey, which elicited just 598 responses, found that 83.3 per cent or more than four out of every five respondents felt there was no consumer protection for Bahamian banking customers.

When asked to rate their satisfaction with Bahamian commercial banks on a scale of one to 10, with 10 the highest, the majority of those surveyed - more than two-thirds or 70.1 per cent - gave ratings of five or below.

The survey found that many consumers feel Bahamian commercial banks are levying “too many” fees, and that these fees do not match the services offered.  And only 172 persons or 28.8 per cent of respondents were aware of the Consumer Protection Commission’s existence before taking the survey.

Mr Gomez said: “We wish for the Government to look at the banking sector and determine whether there is time to introduce competition through the granting of new licenses.

“We hope that this survey will start some discussion about the banking practices, fees and customer service. We want banks to now look at their level of service that they give to the customers, and take as legitimate the complaints about fees and about service, and not simply do business as usual.”

The CPC, through its research unit, initiated and conducted the consumer banking survey between September and November 2016. It acknowledged that the total of 598 respondents was 402 short of the 1,000 goal, raising questions about the survey’s statistical significance.

Asked whether they felt that the fees/charges associated with their accounts were appropriate for the services received, 435 persons or 72.7 per cent said ‘no’.

With respect to the number of fees levied by commercial banks, 494 respondents or 82.6 per cent felt there were too many, with just 13 saying there were too few.

As to whether Bahamians were given sufficient advance notice of fee changes, 385 or 64 per cent said they never received warnings. Another 12.4 per cent or 74 said they “rarely” received warnings, while 93 or 15.6 per cent “sometimes” got them.

When it came to consumer redress, 379 persons or 63.4 per cent indicated that they have had a dispute or complaint with their bank. Of those, 167 persons or 27.9 per cent said their complaint was resolved in a timely manner, with  228 respondents or 38.1 per cent of the total indicating the reverse.

Some 232 respondents or 38.8 per cent said their complaint was resolved to their satisfaction,with 119 or 19.9 per cent answering in the negative.

As for whether Bahamians would recommend their bank to friends, family or associates, more than half - 310 or 51.8 per cent - said ‘no’, with 36.1 per cent or 216 saying they would.

“We are going to  make the results of the survey available to the Ministers of Finance and Labour, the Central Bank and each of the commercial banks in the Bahamas,” Mr Gomez said.

“We would wish to get a public discussion going to determine if the banking/customer service process is broken and needs to be repaired.

“Is the banking fee structure running amok because banking fees are unregulated, and are banks trying to improve their balance sheets through fee increases as opposed to creating new and innovative banking products for their customers in an effort to improve income?”

Mr Gomez further questioned: “Are banks charging their Bahamian customers fees not allowed in their own country, and are Bahamian-owned banks adopting these fees simply to be competitive with the foreign-owned banks? Are banks concerned about customer service? Do they care that teller lines are long in most branches all day long?”

The survey results are unlikely to surprise many, given the negative attitudes many Bahamians hold towards the banks, which are easy targets for public ire in a low-growth, high unemployment environment.

Apart from the spate of new and increased fees levied in recent years, the banks have also been perceived as ‘villains’ over the numerous foreclosures and home sales they have enforced.

The Commission’s survey, though, challenges last year’s findings by the Central Bank of the Bahamas, which refused to counter rising bank fees with price controls, despite increases as high as 43 per cent on “a significant number of services”.

The regulator, unveiling its survey of commercial bank charges for the six months to end-June 2016, said direct intervention through mechanisms such as price controls would only create further distortions that negatively impact consumers.

The survey, reflecting previous comments by Central Bank governor, John Rolle, said improved consumer protection and financial literacy were the best safeguards to concerns over increased bank fees, and promised to “strengthen” these areas.

“An analysis of data compiled over the last six years showed that banks have raised fees on a significant number of the services charged and, in some cases, introduced new categories of fees on existing facilities,” the Central Bank said.

“However, there have been a few instances where fees have been adjusted downwards, particularly for those which are considered high volume services.

“While the current framework reflects structural factors impacting the domestic financial sector, the sector would benefit from initiatives on several important fronts.

“This includes strengthening practices and codes on financial literacy and consumer financial protection, which the Central Bank will pursue under its strategic focus on the sector. It is, however, believed that a direct response through price controls would introduce adverse distortions in the sector.”

Comments

The_Oracle 1 year, 7 months ago

To hell with the fees, branch closures and layoffs have the public standing in line for literally hours! Banks are to be avoided like the plague! Someone aught to sell sandwiches and bottled water to people standing in line! that and the staff all seem to be multitasking and therefore following up on nothing! Missing bank cards, Credit Cards, wrongly printed checks, banks have become a crap shoot! Tellers and staff must go home feeling as if they've run a marathon every day! Betcha the service is better in Barbados or wherever the hell they've moved the HQ to.

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bogart 1 year, 7 months ago

Beg to differ. Not more but fewer are required. The catchment area given the small population cannot support more. Banks need to make money from customers to operate and grow and given the limited pool on this fixed in size land mass - island, supporting x amount of sources banks can make money to operate and turn a profit hence more licences will cause chaos. We have already too many banks forcing market share to be cut in many slices and fees etc being increased to cover operating expenses and profits - plus segments being shipped overseas to lower operating expenses. Banks here have been allowed to do all sorts of things without care and concern for the public and customer. In Canada mergers are basically a nono because of concern for the customer, here well it happens and Canada is one of the largest countries with New Providence a tiny island. Banks here have considerable leeway in that one may even question the almost identical rates to be pre agreed. Central Bank seem to have little imput with actual example being the many challenges the Bank of the Bahamas has been going through year after after year after year and noone fired and still compete with banks doing correct procedures and paying fortunes to advertise, operate and maintain market share. There has been noone to protect customers, over zealous loan officers seeking to make targets in giving out hard to meet targets set by overseas, Auditors auditing who get paid by the same institution. Collapse of the mortgage brought on by many marginal loans supported by Indemnity insurances in a hurricane prone area and no check on the over use of indemnities paid by customers to protect banks is criminal. Banks more interested in the 45% debt service ratio which has been in existence for over 2 decades and while interest rates have fallen supporting lower loan payments supporting loan amounts noone has look on whether ther remaining 55% can servive living on paying the bills and increasing cost of living on the 55% side. Simply put fewer is better because if there cannot be controls on these we have now it is time to do some trimming to make it fewer which is better for everyone. We need an independent consumer protection agency and an Ombudsman.

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John 1 year, 7 months ago

Who else got their certificate of deposit from Royal Bank recently. RBC is now paying ZERO PERCENT interest on fixed deposits..go figure people.!

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bogart 1 year, 7 months ago

The monopoly of the big boys need to be investigated. All banking policies and practices. Evidence of customer dissatisfaction should be followed up with investigations. Excellent opportunity to have the Privy Council comment on the establishment of an OMBUDSMAN to investigate many customer complaints instead of clogging up the COURT system by customers wronged by these banks. Making huge profits and repatriating profits and not paying interest from money here is insane. Controls and investigations are needed. Setting aside provisions for loan losses instead of paying interest should have someone look into why there are loan losses and if due care and attention and negligence can be proven then persons should be jailed instead of being let go with a pay package and recommendation to be employed in the same field.

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Socrates 1 year, 7 months ago

competition in theory should moderate the market... however, despite the many banks we have now relative to market size, there is no competition on fees or anything else.. mostly u choose ur bank for convenience, slogan, paint scheme or some other meaningless reason...

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bogart 1 year, 7 months ago

Absolutely correct! Plus no regulators. The big boys club. Customers complaints need justice. Lawyers almost always refuse to challenge banks for fesr of being struck off the 'BANKS APPROVED LIST OF LAWYERS' There is no competition. For instance all banks use the 45% Total debt Service Ratio, that is 45% of your income to handle all loans one has and uses an Indemnity Insurance to finance up to 95% of the selling price or Appraised value of the house whichever is lower. There is a defect in this because of what is considered loan repayments and monthly fixed repayments also can be added. A customer making 1,000 versus another making 10,000 is different because while the costomer making 10,000 whii eat the same aand almost similar expenses he will be albe to live on 2,000 per month versus the customer having 550 remaining per month to survive. Banks know of this flaw. Many smaller customers have to struggle and catastrophe is likely. Flawed analysis by bankers resulting in customers losing homes need to be investigated and where due care is not done or negligence or fraud is found , these banks must be liable. After a problem the customer has no money to hire a lawyer who is likely to not accept the case. There must be someone or some agency where the customer can go to to get justice!

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