House passes bank-fee bill - Jackson, Shaw say regulation not enough to protect depositors
Daraine Luton, Senior Staff Reporter
CHIEF crusader for a framework to deal with bank fees, Fitz Jackson, said on Wednesday that the banks should be prevented from benefiting from deposits, which are deemed as dormant.
The South St Catherine member of parliament, who was contributing to a debate on the Banking Services Bill, said based on the fee structure provided by the Bank of Jamaica, after the 15-year period, if a depositor has $10,000 in the bank, the institution would have taken it all away in fees.
"The only beneficiary is the financial institution and the poor depositor gets nothing," Jackson said.
Under the Banking Services Act, which was passed by the House on Wednesday, any money which remains unclaimed in a deposit-taking institution for at least 15 years is to be turned over to the Accountant General, which in turns pays the money into the national treasury.
'Do the right things'
Jackson argued that it is unfair for the financial institutions to be the beneficiaries of such deposits, which have fallen into a state of dormancy.
"We as a state cannot say it is business. Even if it occurs in other jurisdictions, if we are going to be the only one to do the right things let us do it, let others follow us," Jackson said as he argued that the Parliament should not accept the banks' explanation that the fees being charged reflected an administrative cost.
Despite his plea for a clause in the bill to prevent persons from losing their funds that have been deposited if the account becomes dormant, the House passed the bill without including the proposed no-diminishment provision. The bill is required under Jamaica's four-year Extended Fund Facility with the International Monetary Fund (IMF).
"I feel very strongly that we have to say to our small depositors, you are not going to be swallowed up by the actions of the institutions in the financial sector," Jackson said while noting he has no desire for banks to fail. "I don't want them to prosper at the expense of the weak and defenceless," he said.
When enacted, the new law will allow the Bank of Jamaica governor to issue codes of conduct pertaining the operations of licensees and issue a code of conduct on consumer-related matters. One requirement is that any interest rate, however described by the bank, should be expressed as an effective annual rate, and calculated in a standard manner across the banking services industry. The new law also places an obligation on the banks to keep language in contracts with customers in a simple and clear manner to ensure that the key terms such as rates, fees and payment date are identified for the customer's attention.
Piloting the bill through, Phillips noted that the Code of Conduct would require banks to protect the consumers of banking services, since it requires that customers be provided with changes to fee structure with reasonable notice.
"It would ensure that customers have access to information relating to their accounts at a reasonable cost ... . Banks and other financial institutions will be required to provide customers, in easily understood language, with the charges and various fees that will apply to the various services and to provide reasonable, understandable comparison with the fees of other institutions," the minister said.
He noted that it would be an enforceable code, with sanctions, which would assist in protecting customers of financial institutions. The sanctions including a $2 million fine or six months in prison for the breach of the code of a $3 million fixed penalty to be imposed by the BOJ governor.
But the opposition spokesman on finance, Audley Shaw, said the bill does not go far enough in dealing with bank fees and has called for the Government to put regulations in place to govern the matter of fee charged by financial institutions.