Rosalea Hamilton | The bank fees legislative football game

At a time when the nation is reeling under the oppressive fallout of the COVID pandemic, the banks’ imposition of higher bank fees and charges has evoked a visceral reaction from many. Even Prime Minister (PM) Holness and Finance Minister Nigel Clarke have joined the public outrage and have denounced the increased fees. They join PM Mia Mottley and other leaders across the world who are pressuring the financial sector to reduce or eliminate predatory fees and charges.

Although Minister Clarke expects the banks to be responsive after his dialogue with them, the banks have so far stood their ground, with one bank delaying the fee hike for six months. Appealing to the banks to pay attention to the social context, the PM has urged them to be “fair and conscientious” and highlighted his “higher duty to protect the vulnerable”. So if the banks fail to act, surely, we can expect the PM to take legislative (or some alternative) action to protect the vulnerable. Right? Well, the Government’s legislative track record on this matter leaves us in doubt!

LEGISLATIVE FOOTBALL GAME

In November 2013, MP Fitz Jackson raised concerns about bank fees through a private member’s motion. At that time, banking interests were working closely with the Executive to monitor the implementation of Jamaica’s IMF economic reform measures through the Economic Programme Oversight Committee (EPOC). The banking interests, which have maintained almost unlimited access to political power, dominated the 11-member EPOC, which comprised five persons from the financial sector, three from the public sector, and three from civil society.

Despite MP Jackson’s efforts to rein in bank fees, Former Finance Minister Peter Phillips surprisingly announced new taxes on the use of ATMs/ABMs, electronic banking, point-of-sale machines, cheques, and Internet transfers in April 2014, a move that would inevitably increase bank fees. Opposition Spokesman on Finance Audley Shaw accused the Government of collaborating with the banks and making the cost of doing business more expensive. In a rare victory for strong public advocacy, the proposed taxes were withdrawn.

By June 2014, under the scrutiny of the EPOC, Parliament adopted The Banking Services Act in line with the commitments under the four-year Extended Fund Facility IMF programme. However, MP Jackson was unable to influence the PNP-dominated Parliament to include adequate measures in the legislation to protect depositors. In fact, Opposition Spokesman on finance, Audley Shaw, noted that the legislation did not go far enough in dealing with bank fees and demanded the relevant regulation.

Undeterred, in 2017, under the new JLP Administration, Opposition MP Jackson tabled a draft bill to amend the 2014 Banking Services Act to regulate fees and charges, provide more information and a mandatory service package to customers. Using their legislative majority, the JLP Administration defeated the bill with a 30–29 vote on February 13, 2018. Audley Shaw, then minister of finance, argued that most of the provisions in the bill are in the 2014 Banking Services Act (which he previously criticised) or in The Banking Services (Deposit Taking Institutions) (Customer Related Matters) Code of Conduct, 2016. However, according to the Bank of Jamaica: “The Code is not intended to provide consumer protection for users of financial products and services nor is it intended to regulate fees and charges … .” Minister Shaw further promised that those areas of the bill not captured in The Banking Services Act would be included in a Consumer Protection framework that would be implemented in 2018. To date, no such framework exists.

We clearly have a problem! It seems like a “legislative football game”. Neither PNP nor JLP administrations have created an adequate policy/legislative framework to protect the public or the most vulnerable. A core problem is that the main players in the game have been the Executive. The public has no influence on policy or legislation. The non-executive legislators, like MP Jackson at that time, have no effective influence and have been unable to represent the voice of their constituents on this matter to ensure equity and protection for the most vulnerable.

EQUITY AND PROTECT THE VULNERABLE

Speaking at the JSE Conference on January 25, PM Holness noted: “My job as the leader of the Government is to facilitate as much with market-based approaches and solutions, but I have a higher duty to protect the vulnerable of the country … I am not here appealing to your conscience. It makes good business sense to protect the people of the country.” So, will the PM enforce the protection of the vulnerable using legislation or will he rely on the bank’s “good business sense”?

For banks, “good business sense” means higher bank fees and charges. This was clearly stated by the Jamaica Bankers’ Association (JBA) insisting that although negatively affected by the pandemic, the banks have acted as a “shock absorber for the economy”, engaging in costly operations to continue services. Banking services are indeed expensive. In addition to the obvious infrastructure and personnel, the pandemic has accelerated demand for digital financial services (DFS), fintech technology, and related security. To be globally competitive and to meet the global financial needs of businesses, as well as the public at large, banks and other financial institutions must remain financially viable. It is, therefore, in the public’s interest that banks (or alternative financial institutions) survive and continue to provide needed financial services.

The central challenge is how to create policy to support financial institutions while protecting the most vulnerable in our society, including micro and small businesses, who need banking services but are unable to bear the burden of higher fees. In doing so, we need to balance the social and economic benefits of market-driven decisions to ensure viability and growth in the banking/financial sector, against the risks of further alienating the unbanked and creating financial instability if market-driven decisions, such as increasing bank fees/charges, are in fact predatory and exploitative, or perceived as such. How should we forge consensus between these competing interests and shape policy in the best interest of our country?

A credible resolution must involve careful analysis of relevant data. While public servants provide technical advice on macroeconomic impacts and other implications of higher fees/charges, policymakers tend to lack data from the public that can provide valuable details about the impact of high bank fees on their lives and livelihoods and how best to resolve this matter.

What are missing are appropriate channels for the public to influence the policy. The Economy and Production Parliamentary Committee can be used to receive submissions from citizens and organise meetings with citizens, community groups, and sectoral organizations, as provided by Standing Order 73C. In so doing, the recommendations from the Parliamentary Committee to the House of Representative will be informed by the perspectives of the public as well as the committee’s own research and technical advice on the matter. What is also needed is a reformed Parliament that enables a non-Executive majority to vote and override the Executive on policy and law, if deemed in the best interest of the public. Without such reforms, the Executive will continue to dominate the legislative process and continue to make suboptimal decisions in the interest of a few.

The “duty to ensure equity and protect the vulnerable” and, importantly, to make optimal decisions in the best interest of all Jamaicans, is a shared responsibility of all members of Parliaments, as well as the public, and requires a different approach to making policy and law.

Rosalea Hamilton, PhD is the founding director of Institute of Law & Economics. Send feedback to: rosaleahamilton@gmail.com