'Outrageous' bank fees slammed
By NEIL HARTNELL
Tribune Business Editor
A FORMER Chamber of Commerce president yesterday blasted Bahamian commercial banks for imposing "astronomical and outrageous" hidden fees that he took four months to pick up on, and urged the Government and regulators to implement greater oversight of an industry he described as "a cartel".
Dionisio D'Aguilar, president of the Superwash laundromat chain, told Tribune Business that he was "outraged" by the 2 per cent 'excess penalty fee' CIBC FirstCaribbean International Bank (Bahamas) had begun imposing on clients who went into overdraft - even for one day a month - and had established no such facilities with the bank.
This fee, Mr D'Aguilar said, was on top of the normal 17 per cent that he as a businessman had to pay on an overdraft, and amounted to an effective annual rate of 730 per cent per year if funds were borrowed for one day. He questioned whether its CIBC parent had such fees in Canada.
Calling for greater government and regulatory oversight of commercial banks, Mr D'Aguilar described the Central Bank of the Bahamas as "useless" when it came to supervising the fees they charged.
He called on the Government to create a new regulatory agency, if necessary, and ensure there was "some sort of approval process" for commercial bank fee increases - focusing on whether they were fair and reasonable.
"The banks, having taken a killing on their bad loans, are implementing outrageous and astronomical fees to try and recoup some of the losses they've incurred on those loans," Mr D'Aguilar charged.
"For example, CIBC FirstCaribbean have decided to impose a 2 per cent fee on a one-day loan. If you happen to go into overdraft, and let's say you go into overdraft for $30,000 for one day, they will charge you $600 for that one day. That equates to an annualised rate of 730 per cent.
"They don't call it interest, and on top of that they charge you the 17 per cent interest they normally charge you for an overdraft if you don't have an overdraft facility fee in place. This is when they impose this fee. Why would you charge such an outrageous fee."
Mr D'Aguilar said that while CIBC FirstCaribbean ultimately reversed the 'excess penalty fees' it had levied on Superwash, totalling $955 during one month, this only happened after he vehemently complained about it.
"I'm a large and reputable customer, and I'm not sure they're doing it for everyone," he added. "I had to complain, and now they're trying to drive me to set up an overdraft facility with them.
"My concern is that I don't know whether they've contacted all their customers about this, and if people know they're being charged these fees. It took me four months to pick this up."
The former Chamber president said that by charging the 2 per cent in the form of a 'fee', and FirstCaribbean applying it in the manner it was, there was no link with the traditional determinants of interest - perceived risk, plus duration and size of the loan.
He explained that if a client without an overdraft fee went into this position for more than one day in a given month, FirstCaribbean would levy the 2 per cent 'excess penalty fee' based on the maximum overdraft amount on the account statement.
"What they do, in the course of a month, is they look at the highest negative balance you have and multiply it by 2 per cent," charged Mr D'Aguilar. "They pick the highest negative number, and multiply it by 2 per cent for the month. I think that's absolutely outrageous."
Mr D'Aguilar said he was charged $955 in 'excess penalty fees' for July as a result of two different accounts going into overdraft for two and three days respectively.
In a letter to FirstCaribbean executives, he wrote: "The excess penalty charge is 2 per cent per day, which equates to an effective annual rate of 730 per cent per year if you borrow money for one day, or 384 per cent per year if you borrow for two days, or 243 per cent per year if you borrow money for three days or 24 per cent per year if your borrow for 30 days. This is, of course, on top of the regular interest rate of 17 per cent that I already have to pay on an overdraft."
Mr D'Aguilar told Tribune Business that Bahamian businesses and consumers were "at the mercy" of the six banks - Royal Bank of Canada, CIBC FirstCaribbean, Fidelity Bank (Bahamas), Commonwealth Bank, Scotiabank and Bank of the Bahamas - who had the ability to operate as "a cartel".
As a result, there was very little option for Bahamian consumers, while changing banks overnight was not an option for many businesses given that they often had existing credit lines and properties mortgaged as collateral with one particular lending institution.
"There should be full disclosure of fees. People should see and view them," Mr D'Aguilar added. "A lot of businesses are not aware of what is going on. I was shocked when I saw $500-$600 of fees for one month.
"The Minister of Finance should focus on this issue, and not allow the banks to do what they want to do."
September 14, 2011
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A political blog about Bahamian politics in The Bahamas, Bahamian Politicans - and the entire Bahamas political lot. Bahamian Blogger Dennis Dames keeps you updated on the political news and views throughout the islands of The Bahamas without fear or favor. Bahamian Politicians and the Bahamian Political Arena: Updates one Post at a time on Bahamas Politics and Bahamas Politicans; and their local, regional and international policies and perspectives.
