OTTAWA – Today, in response to Canada’s big six banks reporting their new record annual total profits for the fourth year in a row — totalling $29.29 billion (up 15% from $25.46 billion in 2011, and more than double their 2009 total profits of $14.34 billion), the Canadian Community Reinvestment Coalition (CCRC – Canada’s largest and leading bank accountability coalition) is making it easy for Canadians to send a letter to the federal Conservatives and opposition parties calling on them to implement accountability measures to ensure bank profits are not based on gouging customers and arbitrarily cutting credit, loans and services, and to ensure the banks support Canadian economic development and job growth.

The big six banks’ profits for the 2011-2012 fiscal year were as follows:

BMO – $4.19 billion (up 35% from 2011′s total of $3.3 billion)
CIBC – $3.3 billion (up slightly from 2011′s total of $3.1 billion)
National Bank – $1.6 billion (up 26% from 2011′s total of $1.2 billion)
Royal – $7.5 billion (up 17% from 2011′s total of $6.7 billion)
Scotia – $6.2 billion (up 17.6 from 2011′s total of $5.27 billion)
TD Canada Trust – $6.5 billion (up 10% from 2011′s total of $5.89 billion)

As the CCRC predicted in December 2008, the failure of the federal Conservatives and opposition parties to regulate Canada’s big banks in the public interest has allowed the banks to gouge out of Canadians the more than $16 billion dollars in losses and writedowns they suffered in 2008 – losses which were due mainly to their own irresponsibly risky investments.

Canada’s wage gap is growing and the highest in 30 years, and Canada’s big six banks are taking $10.3 billion dollars of Canadians’ money to give as bonuses to their executives and staff (7.5% more than in 2011).

Beyond the record-high gap between the prime rate and credit card interest rates that the banks have maintained for the past decade, and the regular gouging practice of continuing to charge interest on the full amount of a credit card debt even if most of the debt has been paid off, other examples of bank gouging and excessive profits include the following:

  • CBC TV’s Marketplace piece about bank gouging of seniors (April 6, 2012 — NOTE: Piece starts at 21 minute mark and runs for 5 minutes);
  • CBC TV story about credit-card gouging of another type, and;
  • CBC.ca article about gouging of retail companies by credit card companies.

Every survey done in the past decade has shown 90 percent of Canadians believe access to banking services and credit is essential for functioning in society – so given that the consumer is always right the federal government should regulate banks as they do other essential services like heat and electricity.

These regulations are also needed to increase bank accountability in return for the almost $200 billion in support the federal government gave the banks in 2008-2009.

“Past government actions and the Conservatives’ recent credit card and debit card codes and regulations are too little, too late to ensure Canada’s big banks are not making excessive profits from gouging customers and cutting services and failing to lend to job-creating Canadian businesses,” said Duff Conacher, Coordinator of Democracy Watch and Chairperson of the CCRC.

“To help the Canadian economy overall, and to ensure the big banks serve everyone fairly at fair prices, the federal government must facilitate the creation of a national financial consumer-directed watchdog group, and require independent audits to determine if the banks are reaping excessive profits through gouging interest rates and fees, and the arbitrary cutting of credit and services for some customers and communities,” said Conacher.

“Every dollar of excessive profit for the banks, and every person and business the banks unjustifiably cut off from credit, costs the Canadian economy because it means that the banks are overcharging for their essential services and loans, and choking off spending and job creation,” said Conacher.

In February 2011, the federal Conservatives’ Task Force recommended extensive measures to increase financial literacy in Canada, but ignored the lowest-cost, most effective and broadly supported solution to this problem which is to use the innovative “pamphlet method” to create a membership-based Financial Consumer Organization as recommended by the federal MacKay Task Force and House and Senate committees in 1998, and an Individual Investor Organization as proposed by an Ontario legislature committee in 2006.

Financial service industry customers and investors are currently gouged with extra charges that companies in the industry use to pay their more than $400 million annual costs for industry advocacy efforts (advertising, lobbying, political donations and gifts).  The most effective way for the federal government to balance the marketplace is to implement the pamphlet method to give customers and investors an easy way to fund their own advocacy watchdog groups.

“No corporation has a right to gouge or unjustifiably cut services, especially when providing an essential service such as banking or trying to recoup self-inflicted losses like the banks are suffering from, but the Conservative government is continuing the negligence of past federal governments by subsidizing the big banks and other financial institutions with hundreds of billions of taxpayer dollars while failing to effectively require them to maintain loans to creditworthy customers and serve everyone fairly and well at fair prices,” said Conacher.

“The best thing the federal government can do to help the Canadian economy overall is to ensure effective, ongoing financial services industry accountability by requiring banks to prove their loan and investment interest rates and charges are fair, by auditing bank lending and competition levels in communities across Canada and, as recommended by the 1998 MacKay Task Force and House and Senate committees, by requiring financial and investment companies to distribute a pamphlet in their mailings to customers and investors that invites them to join a citizen watchdog group to watch over the financial industry and federal government,” said Conacher.  “At little or no cost to the federal government or the financial services industry, consumers and investors across Canada can be given a very easy way to band together to help and protect themselves through forming and funding their own watchdog groups.”

In addition to the creation of the two watchdog groups using the pamphlet method, the Canadian Community Reinvestment Coalition (CCRC), established in 1997 and made up of 100 citizen groups from across Canada with a collective membership of more than three million citizens, called on federal Finance Minister Jim Flaherty to work with opposition parties for effective bank and financial institution accountability by (See details about these proposals below):

1) requiring banks to prove through an independent audit (that goes back at least 10 years) that their credit card and other consumer and small- and medium-sized business loan interest rates and fees do not amount to gouging, with a public report on the extent of gouging issued by the Financial Consumer Agency of Canada (FCAC) – To see details about this proposal, click here;

2) empowering the Competition Bureau to, as has been done in the U.S. for 20 years, evaluate and publicly report on the number of business loans applied for, approved, rejected and called for specific categories of business borrowers, and the level of competition in basic banking services, across the country – To see details about how the U.S. has required for more than 20 years, click here, and;

3) Require federally regulated banks and other financial institutions to use the Ombudsman for Banking Services and Investments (the Conservatives have allowed banks to set up their own complaint dispute resolution systems that are not as independent and effective as the Ombudsman).