Letter to the Minister of Finance about “No-Name” Bank Machines (October 12, 1999)

Hon. P. Martin P.C., M.P.
Minister of Finance,
Department of Finance,
21st floor,
140 O’Connor Street,
Ottawa, Ontario, K1A 0G5
Dear Minister Martin,
It has come to our attention recently that Ano-name@ or Awhite-label@ automated teller machines (ATMs) are appearing at more and more locations across Canada. The proliferation of these ATMs is bad news for Canadian consumers. This letter will outline our main objections to the current situation, and our suggested course of action.
The Ano-name@ ATMs charge consumers a fee in addition to their regular banking fees. However, consumers already pay fees for the using their debit cards; these fees alone should ensure that the customer has convenient access to ATMs. Offering Ano-name@ ATM service at convenient locations is price-gouging consumers who might for various reasons have trouble getting to a regular ATM. For instance, someone may feel more comfortable, late at night, using an ATM in a convenience store than at a deserted bank branch. It is quite cynical of the industry to exploit this type of situation to extract higher fees from consumers.
Moreover, the fees at these ATMs are not regulated and allow for exorbitant rates to be charged. Consumers have little choice but to pay these rates if other machines are not available or become Awhite label@ as well. If the industry were interested in offering consumers convenient access to their money at reasonable rates, there is a way they could do; they could encourage the use of Acash-back@ at the till with the debit card. It is our understanding that where they are located, the Ano-name@ ATMs will replace or pre-empt Acash-back@.
It is well known that there is a problem with access to banking services in poor urban areas, as well as rural and remote areas, and the problem is getting worse as more bank branches close. We are very concerned that Awhite-label@ or Ano-name@ ATMs will move into these areas, offering vulnerable consumers limited service at unacceptably high prices. Centretown in Ottawa is a very good example. In the area around Gladstone and Bank Street, there used to be four bank branches. Now there are no branches, no ATMs, and only a Money Mart nearby (another company that charges unacceptably high prices for basic bank services). The Ano-name@ ATMs could soon move in.
It may seem reasonable for the banks to place ATMs only where they can make a profit. However, it is important to remember that banks are addicted to a very high rate of profit, and have little incentive to provide service that might yield a more normal rate of profit. We are concerned that, instead of ensuring that all consumers have convenient access to ATMs, the industry will withdraw its services to make way for the Ano-name@ ATMs. The Ano-name@ ATM operators will then be free to raise their fees even further.
One of the main operators of the Ano-name@ ATMs is actually a bank subsidiary. In this case, there is no real competition with the major banks; it is simply a bank using the unmarked ATMs to charge extra fees. The bank in question could withdraw its services from many more locations, and let its subsidiary take over in order to make higher profits.
The financial services market is clearly failing ordinary Canadians. The new financial consumer agency should be given the authority to develop regulations in this area, in order to protect consumers and promote fair access to banking services for all Canadians. This issue should be a priority for the new agency, since the Ano-name@ ATMs operators are not bound by any rules or codes of practice. We would like to see the new Agency develop a national strategy to promote access to bank services. As well, the new agency should convene regular public proceedings to review trends and pricing in financial service offerings. The activities of these Ano-name@ ATM operators should not be allowed to prevent fair solutions to the access problem.
Yours sincerely,
Michael Janigan
Executive Director
Frank Swedlove
Executive Director, Financial Sector Review Group
Department of Finance