Should the Harper government cap bank ATM fees?

A contentious issue that probably affects the majority of adult Canadians was debated in the House of Commons on Monday afternoon.

New Democrats introduced an opposition day motion asking the Harper government to cap ATM withdrawal fees at 50 cents per transaction.

The motion reads as follows:

On the surface, it appears to be a motion that most Canadians — regardless of political stripe — would agree to. We've all had to pay $2, $3 or even more when forced to use a bank machine that doesn't belong to our respective home financial institution.

In the House, NDP Consumer Affairs Critic Glenn Thibeault called the fees a "rip-off."

"Canadians are angry...as their families are being nickled and dimed by banks reaping in record breaking profits while they struggle to put food on the table and pay for the other necessities of life," NDP MP Glen Thibeault said on Monday.

"In many European countries, [ATM]withdrawal fees...are free. In the UK, 97 per cent of transactions are free of cost. In fact, a report from the British Bankers Association, comparing its banking system to that of ten other developed nations, found that Canada had the highest fees for ATM withdrawals from their own bank."

Thibeault added that Canadians collectively pay somewhere in the range of $400 million a year for these levies.

"The most shocking part of ATM fees is that, on average, the real cost of processing a transaction today is estimated to be around $0.36," he said.

"Currently there is no limit on what the operator of an ATM can charge a consumer for using there machine."

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The motion, however, is unlikely to pass.

Conservative MP Mike Allen said that he would vote against it and expected most of his Tory colleagues to do the same. In Parliament, Allen argued that putting a ceiling on these fees could have a negative impact for consumers who live in smaller communities.

"By actually putting a cap on the fees...if the banks eventually can't service some of these lower volume areas, they're going to get out of that business," he said.

"[The ATM is] going to go to a private operator and...the surcharges could be anything."

In other words, if a bank isn't making any profit on their ATM at a rural grocery store, the bank might remove it. If that happens, consumers would either have to be serviced by a private ATM operator (which are not federally regulated) or do without a bank machine in their community.

Allen added that consumers are paying for this convenience.

"When you think about it now, it wasn't so many years ago either [that the] only choice people had in some of our small communities...was that they actually physically had to go to a bank, they had to wait in line...and actually get that money out," he said.

"There's an opportunity cost for those people now. They can actually go very close. They don't have to burn the gas to go...30 or 40 miles at a $1.25 or $1.30 a litre.

"They're actually better off than they would have been had they had to go the bank in the community."

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Not surprisingly a senior fellow at the free-market Fraser Institute agrees with the Tory MP. Mark Milke says that if politicians want to help the middle class there's better ways to do so.

"Private institutions can charge what they want—I choose to bank with a bank that doesn't charge me fees," he told Yahoo Canada News in an email exchange.

"Bank fees are an easy target, like gasoline prices, because they’re ubiquitous, but if the NDP, Liberals and Conservatives want to really help consumers, as opposed to this penny ante stuff that is anyway in the preserve of the private sector, then they should all do the following:

"Support the abolition of dairy and poultry marketing boards, which are government-allowed cartels that gouge Canadians and especially the poorest of Canadians given they spend the greatest proportion of their income on food; Liberal MP Martha Hall Findlay (in addition to past reports at the Fraser Institute) has written on this and notes that system costs families an extra $300 per year.

"Support the abolition of corporate welfare—which according to my 2009 study amounted to $1,244 per taxpayer. (That’s a tad higher than what bank fees may cost someone—if one even pays such fees—which not everyone does.)

"Support the privatization of auto insurance across Canada where that is not already the case; as I and other [Fraser Institute writers] have noted in the past, consumers are best served in a system with competition and choice.

"And lastly, support abolishing the antiquated Prohibition-era government liquor stores that still exist in every province except Alberta. Such government-run stores and the high-priced help and products they sell, are not in the consumers’ best interest.

"So when the three parties, and their provincial counterparts, finish with the above, consumers/taxpayers will be much better off. Or they can try and micro-manage bank fees."

What do you think? Should the Harper government cap ATM fees?

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