Op-ed in Toronto Star: Fed up with outrageous NSF fees when you bounce a cheque? The government says lower fees are on the way

Ottawa has promised to reduce junk fees, like NSF, in its mini-budget. It’s the right thing to do for Canadians struggling with the cost-of-living crisis.

As Ottawa prepares to release its mini-budget in the fall economic statement, there are a slew of new announcements coming up, including one that ensures people have access to fair banking.

In a recent press release, the federal Department of Finance said that it will be lowering non-sufficient fund fees, popularly known as NSF fees. This comes after the initial announcement made in this year’s federal budget to clamp down on junk fees.

In a bid to make life more affordable for Canadians, the government said that it is taking action to crack down on junk fees, including unexpected, hidden and additional fees.

NSF charges are one of those junk fees charged by Canadian banks and financial institutions. These fees, charged to bank clients when their cheques are returned or payments cannot be made due to a lack of funds, are predatory and disproportionately affect the most vulnerable people.

As the government admits in seeking to regulate banking service fees, they are an unfair penalty on lower-income Canadians. Ranging between $45 and $48, big Canadian banks are making millions of dollars in profit by charging these fees.

While financial reports do not disclose the breakdown of the different kinds of fees charged by banks, collectively these account for roughly up to six per cent of the total revenue earned by the banks.

This is by no means a small amount being made on the backs of people in desperate need of support.

Due to inadequate access to banking services and products such as overdraft protection or small dollar loans in case of emergencies, low- and moderate-income people are pushed to take out payday loans to avoid NSF fees.

These loans charge Canadians anywhere from 400 per cent to 600 per cent in annual interest, leading to a vicious cycle of debt.

Lowering the NSF fees has been a long-standing demand for fair banking by the Association of Community Organizations for Reform Now, a national community union of low- and moderate-income people. ACORN has been asking the federal government to lower the NSF fees to $10.

In recent years, many banks in the U.S. have not only lowered but completely eliminated the NSF fees.

Nearly three-quarters of the biggest U.S. banks, including 27 of the top 30 earners, have eliminated NSF fees and many other banks are following suit. Data from the Consumer Financial Protection Bureau estimates that consumers are saving almost $2 billion a year as a result of this voluntary measure.

In Canada, lowering NSF fees — which must be substantially reduced — is an initiative that needs to be mandated.

To reduce the burden on low- and moderate-income people, stacking could be explored whereby the banks charge $10 the first time that funds are insufficient, again $10 the second time and no fee the third time.

In today’s digital age, a returned payment or a bounced cheque does not constitute a substantial administrative burden for the banks.

Canada’s big banks reported earnings of more than $1 billion in the third quarter of 2023 and this last quarter will be no different.

At the same time, low- to moderate-income people are facing extreme hardship due to record inflation and skyrocketing rents.

Reducing NSF fees is the right thing to do. The critical part of the iniative is determining by how much — and when.

Donna Borden is the co-chair of the Toronto East York Chapter of ACORN Canada, a national, community union of low-and moderate-income people.

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Op-ed by ACORN member, Donna Borden, for Toronto Star