Hostile, unethical commercial banks

Ramesh Sujanani, Guest Columnist

Over the years, the credit card industry has been the subject of much controversy. Many critics have blamed credit card issuers' loose restrictions for high fees and interest rates, which are often hidden in credit agreements so complex that cardholders have no chance of sifting the wheat from the chaff.

Fitz Jackson, member of parliament for South St Catherine, challenged the banks to explain their charges. I unhesitatingly support his position. One cannot charge applicable fees by using unknown and unsupported data.

Banks make a credit card charge account easier to obtain than a loan, by asking for much less security, so that persons can use the card to obtain cash and pay bills without too much difficulty, and the banks benefit from higher interest.

They say your collateral is not enough to get a loan, and now they are able to overcharge on interest, adding late fees, plus late-payment fees, and late-payment additional interest, should you use your credit card to buy a new fridge.

controversial practices

Rates in most developing countries are four to eight per cent on United States (US)-funded credit cards; in Jamaica, it is as high as 20 per cent for US cards. And in Jamaica, it is effectively 48-50 per cent for a Jamaican-dollar card, probably a world maximum.

This practice did occur overseas, but since 2009, US President Barack Obama signed a new bill into law to curb the most controversial credit card practices, including interest-rate hikes, penalties, and marketing to college students. Permission is required by the user to impose penalty charges and to charge finance fees for previous cycles on the credit card. No interest is charged on due bills over holidays when paid on the next business day.

High fees and charges, by the same token, are being levied on cambios. Banks want to take away business from the cambios and so they have increased fees to cambios for cash deposits to J$1 from J$0.25, a total factor of one per cent, on the foreign exchange value, and almost 400 per cent increase in charges.

FIGHTING CAMBIOS

In 1993, when Jacques Bussiéres was governor of the Bank of Jamaica, the trend was raising rates, and inability to obtain foreign funds from the formal system of bankers. The governor then authorised cambios to operate, and foreign funds became available once again at competitive rates. Bankers never thought the cambios would be successful and capture almost 50 per cent of the market by 2013, and they are trying to claw back these gains.

Their service record to their clients is terrible. They have fewer branches, longer waiting times, inability to assist for lack of competent staff, holding funds longer than necessary on cheques. In most banks throughout Jamaica, there are no public bathrooms, some not even drinking water, yet the client has to stand and wait an hour or two.

In my opinion, banks are often improperly supervised and key employees absent from work. Why else would one see five service counters, two or three always vacant in a crowded bank, and more vacancies when the bank is not busy?

There seem to be persons trying to create a foreign exchange shortage. The Jamaica Manufacturers' Association president has baulked at a foreign-exchange crisis. But there is really none. What's happening is confrontation between banks and cambios, with the former not wanting to take US dollars in cash. There are, in fact, a lot of cash in the system as a consequence.

On the other hand, the banks require four weeks to clear any foreign draft from the system; when we cannot deposit cash, and have a hold placed on our cleared international drafts, this obviously will create a shortage.

Getting back to Fitz Jackson, our local Barack Obama, according to my calculations, the governor of the Bank of Jamaica is due to respond by the 15th of February. Perhaps he may answer before.

So we await answers from the Bankers' Association. I hope there is a response that makes sense.

Ramesh Sujanani is a former cambio operator. Email feedback to columns@gleanerjm.com and ramsuj178@gmail.com.