*An excellent article from the Jamaica Gleaner has been published in iNews Cayman today. Entitled “Fixing fees for profit”, Arthur Hall, Gleaner’s Senior News Editor shows from a just-concluded study by the local think tank, Caribbean Policy Research Institute (CaPRI), that “the income earned by banks from fees and commissions has increased significantly in many Western economies since the early 1990s”.

More from the article:

“The trends suggest that decreasing net interest income and net fees and commissions caused profits to fall in 2006. The banks responded to the declining profits by increasing both net interest income and net fees and commissions in 2007.

“The CaPRI findings are in line with a study by the Consumer Affairs Commission (CAC) which has reported that an analysis of data it gathered on the rates and fees charged by commercial banks in Jamaica for 2009 to 2013 revealed that since 2009, with respect to savings accounts, both the withdrawal and deposit fees at the Bank of Nova Scotia have experienced a 115 per cent increase, moving from $100 to $215.

“It said for the National Commercial Bank, withdrawal fees were also increased by 115 per cent, moving from $100 to $215.”

What is even more worrying is that the article says, “there is not much the government or regulators can do to ensure lower fees”.

The only remedies suggested are “increased competition in the banking sector” and “lobbying efforts by powerful persons and groups in society”.

* The dollar amounts  mentioned above are Jamaican Dollars (1 Jamaican Dollar equals 0.0091 US Dollar)

Neither of those options is going to happen here in Cayman. The retail banks are a tight small group and do not promote much competition between them except for loans but that has dried up now. The only “powerful” lobbying persons are bankers or close ‘friends’ of theirs, and Cayman’s Chamber of Commerce the only powerful group is full of the same.

Years of low rates on mortgages and other loans have eaten into the income banks collect from interest charges, an important driver of bank earnings.

To help make up for lost revenue banks are raising fees, adding new ones and pitching related services.

Overdraft fees are the biggest risers. Bank accounts go into overdraft when more money has been taken out of the account than was actually in it.

According to the Lawyersandsettlements.com website it states:

“One tactic that banks are accused of using to increase their profits from overdraft fees is reordering transactions on accounts. That means that regardless of what order transactions occurred in on a single day, some banks process the largest transactions first. That can lead to a lot in extra fees for a person to pay.

“For example, say a man spends $10, $20, $50 and $100 (in that order) in four transactions on one day, having $140 in his account. Either way, the account will likely still go into overdraft. But, if the account is debited in the order the purchases occurred, then only the final transaction will result in an overdraft fee of $35. However, if the transactions are processed from largest to smallest, then only the $100 purchase will be covered, leaving the customer to pay $35 for each of the final three transactions—for a total of $105 in charges.”

“Another practice that banks are alleged to have used to push customers into overdraft is authorization holds. Authorization holds occur between the time a bank card purchase is made and the time the merchant settles the transaction. Prior to the merchant settling the transaction, the amount of the purchase is held, but it has not actually been withdrawn from the buyer’s account yet. Once the merchant settles the account, which can occur a few days after the purchase is made, the funds are transferred to the merchant and the customer no longer has the money in his account.

“For example, a customer with a $100 in his account makes a purchase of $40. That $40 is held immediately for the merchant, but is not actually taken out of the account because the money has not yet been transferred to the merchant. The customer cannot access this money, but it is still, technically, in his account. When the merchant submits her batch of transactions, the money is then taken from the account and transferred to the merchant.”

This is all completely legitimate.

Fighting banks increased fees is almost futile. They even stockpile savers’ cash on which they pay no interest – and this three day holding onto your cash from cheques issued by another local Cayman bank with the even worse 15 working day hold out from an overseas bank is tantamount to robbery.

Is there nothing we can do to stop it?

Nothing except complain on mass and hope the banks have good hearing.