Bank fees draining dormant accounts - JBA recommends long-term deposits
The Jamaica Bankers Association (JBA) is suggesting that customers would be better off selecting a long-term savings or investment product offered by their banks, rather than leaving the funds idle in a regular savings account.
Over time, such idle funds are eventually designated as 'inactive' and 'dormant' and become subject to charges.
The JBA said bank clients can get around that by investing instead in fixed deposits offered by the banks or unit trusts offered by investment companies.
The group was responding to queries regarding account holders who have been complaining that savings have been depleted on account of fees applied by banks because of inactivity, when their intention had been to save for a rainy day. Gleaner Business was attempting to ascertain the duty of the banks to be more communicative with their clients.
"It is impossible for the JBA to address the specific circumstances in a general way, so customers are encouraged to contact the service quality or customer-complaint teams in their banks to outline any specific issues they may have had so they can be properly investigated and resolved and be provided with guidance and advice on the products that complement their individual and specific needs," the association said.
As it relates to advisories to customers, the lobby group said the experience of the banks has been that notifications are sent to customers using the contact information they provide to the banks.
"However, often when customers change their contact information, they do not update the banks, with the result that several customers do not receive the notices the banks send," the JBA said. "Customers are, therefore, encouraged to keep their contact information with their financial institutions current."
Deposits in the commercial banks amount to $665 billion, according to the most recent industry data published by the central bank on six banks. Information on dormant accounts is published regularly in local newspapers, but efforts to ascertain the size of inactive funds and whether the pool was increasing or declining was unsuccessful. The Bank of Jamaica said it does not maintain that data.
The JBA said the publication of unclaimed funds is not done by the banks, but by the Government, "using information provided by the banks, pursuant to a legislative requirement".
Accounts published as unclaimed would have already been dormant, it said.
According to information provided by the JBA, dormant fees at the Bank of Nova Scotia Jamaica, or Scotiabank, ranges $500 per annum after two years following a year of dormancy to a high of $1,000 per annum after seven years. At Sagicor Bank, a fee of $34.95 per month is applied to current accounts after a year of dormancy, and the same amount for savings accounts after a two-year dormant period.
National Commercial Bank charges $524.25 per annum on current and savings accounts after a year or two years of dormancy, respectively. First Global Bank applies a fee of $500 on current and savings account after two years of dormancy, while CIBC FirstCaribbean Jamaica charges $524.25 after two years.
The JBA said banks typically define inactivity as involving a lack of customer-initiated transactions for a specified period. Accounts become dormant after specified periods of inactivity.
The commercial banking sector currently comprises seven players, but JBA said information for Citibank has not been included because it does not generally provide retail banking services, while JN Bank only joined the market this month and is not yet a member of the JBA.
In February 2014, when a parliamentary select committee demanded answers from the Bank of Jamaica about a raft of bank charges, including a $500 monthly fee for dormant accounts and charges for interim bank statements, then deputy governor of the central bank's Financial Institutions Supervisory Division, Gayon Hosin, said applying charges for dormant accounts is a phenomenon that applies internationally.
Hosin, who has since resigned from the central bank, said dormant accounts pose higher risks for banks as they are natural targets for attempted fraud, both internal and external.
"It requires the banks to exercise a greater level of due diligence in terms of transactions, and so the cost that is imposed is one that is intended to deal with the cost of that higher level of due diligence," she told the committee.
Recently, a parliamentary committee began debate on a private member's bill tabled by Member of Parliament Fitz Jackson seeking to increase customer protection via the regulation of fees and charges, among other proposals, via an amendment to the Banking Services Act.
Private sector interests and the banks have criticised the legislation as government overreach.