Access To Basic Banking Service Ensuring A Right to This Essential Service CCRC Position Paper #2 Summary (October 1997)

Few people would dispute the fact that access to basic banking service is a necessity in today's society. Yet surveys reveal that over 3% of Canadians do not have an account, including 8% of Canadians with an annual income under $25,000 -- a total of at least 400,000 adults.

National surveys have shown a major cause of this problem is that banks require identification for opening accounts and cashing cheques (even government cheques) that people with low incomes or on social assistance often do not have.

Another problem is the hold placed on cheques before funds are released. Cheques are often held for six to ten days -- much longer than the Canadian clearing system requires to clear cheques. Since low-income people usually can't afford to wait that long, it's little wonder that cheque-cashing firms such as Money Mart have expanded rapidly over the past decade.

Service charges also discourage low-income Canadians from opening bank accounts. No one would argue banks should lose money on their accounts. Yet the banks' refusal to provide cost and revenue data for their services means that we simply don't know whether bank service charges are fair.

The federal government' s response to this problem has been inadequate. Doug Peters, former Secretary of State for Financial Institutions, announced voluntary guidelines regarding access to basic banking services in February 1997. But because these guidelines were not enacted into law, they don't apply to all federally-regulated financial institutions, there is no monitoring agency, and there are no penalties if the guidelines are broken. A survey by the CCRC in October 1997 found that bank branches of five of the Big Six banks violated the guidelines by asking for photo ID, minimum balances or mandatory employment before opening an account.

It's clear that financial institutions cannot be trusted to solve this problem voluntarily. The federal government must legislate the right to access.

The right to access to banking services has been enshrined in law elsewhere. In France, and in many U.S. states (e.g. New York, Illinois, Massachusetts, Minnesota) banks are required to offer banking services to everyone.

To ensure that financial institutions treat all consumers fairly, the CCRC calls on the federal government to enact legislation as follows:

• All residents of Canada should be guaranteed an account with a financial institution;
• Financial institutions should be prohibited by law from using a credit check on potential customers as a barrier to opening an account, because there are other ways to minimize the risks of loss or fraud.
• All consumers should be entitled to a low-cost account option that meets their basic needs and does not entail excessive service charges. If financial institutions do not disclose the data needed to determine a reasonable monthly fee for such an account, the federal government should, after public consultation, set a maximum fee.
• Limits on the holding of cheques and other deposits into accounts should be set.
• A periodic and effective monitoring system should be set up and effective penalties established to ensure that financial institutions comply with these service requirements.
• Deposit-taking financial institutions should be required to disclose a bank's profit/loss record and net income before closing a local branch, to allow for a public review before a branch is closed.