Credit card interest rates in Barbados are generally in excess of 20 per cent and many customers and analysts deem them to be unfair and onerous.
In the June 21, 2008 SATURDAY SUN, Minister of Trade, Industry and Commerce George Hutson slammed these rates and other credit card charges as “outrageous”.
Furthermore, he argued that additional fees, such as late payment fees and annual fees, were some of the most glaring examples of price-gouging.
He challenged the credit union movement to come up with its own credit card to help lower its members’ cost of living.
Meanwhile, in the January 23 SUNDAY SUN, three influential groups urged Government and the Central Bank of Barbados to pay more attention to the rates banks were charging.
The Barbados Association of Retired Persons (BARP), the Men’s Educational Support Association (MESA) and the Barbados Association of Non-Governmental Organizations (BANGO) said Government and the Central Bank needed to make sure financial institutions were not exploiting clients in tough economic times.
The associations were reacting to FirstCaribbean International Bank’s announcement of increased credit card fees and charges for services – including in-branch and over-the-counter withdrawals, automated banking machine (ABM) withdrawals at other banks, printing ABM mini-statements, night deposits, overdrafts, safekeeping and securities, and early redemption of fixed deposits.
“I am very concerned about these new charges,” said Ernest Batson, then BARP’s president, noting that Government should look into the matter to see whether there had been an abuse of banking power.
“If people can’t afford to spend money or they are prevented from spending for one reason or another, the circulation of money in the economy will be adversely affected and the economy could be crippled.
“It’s in the Government’s interest to see that this doesn’t happen,” he said.
MESA head Ralph Boyce called on the Central Bank to adopt “a more hands-on approach” on the issue of bank charges so that customers were not disadvantaged.
“The Central Bank, as a regulatory body, needs to pay closer attention to these things,” he said.
BANGO secretary general Roosevelt King said, “This is something Government needs to urgently become involved in, otherwise these charges can get out of hand.
“We need to ensure that there is a reasonable profit margin for banks’ services but we have to protect the banks’ clients from being exploited.”
In the January 20, 2011 WEEKEND NATION, Barbados’ Ambassador in Washington and former banker John Beale criticized commercial banks for imposing fees in order to boost profits, saying some fees were unjustifiable and unreasonable.
And he said Bajans should complain loudly and in the end, the Central Bank may have to step in.
One such “unreasonable” fee was charging depositors for keeping inactive accounts in a bank.
“There is no justification, in my mind, to charge a person because there is no activity on it”, argued Beale.
“The bank doesn’t really have a cost. If they want to encourage you to use it, there are other methods of doing that, but certainly not to tell you that because you have money in the account ‘but] don’t really use[it], they are going to charge you,” he said.
The ambassador said he knew from experience how and why such fees are imposed and contended that they were meant to increase banks’ profits.
He was quick to point out, however, that a vigorous consumer response would be useful for a number of reasons.
One of them was that fees are not cast in stone and can be negotiated and discussed.
Secondly, loud complaints about unwieldy fees may attract the Central Bank’s attention.
“If it gets too complicated,” Beale said, “I think it is the duty of the Barbados Central Bank as the regulator to come in and say, well, gentlemen [and ladies], what is it that you guys are doing? Is it reasonable?
“Then the Central Bank would force them one way or another.”
Similarly, in the March 14, 2011 BARBADOS BUSINESS AUTHORITY former Central Bank of Barbados Governor Sir Courtney Blackman said the Central Bank and its Ministry of Finance could crack down on high or unreasonable fees charged by commercial banks.
“It is a responsibility of the Central Bank to monitor so-called fees by commercial banks to see whether they are justified or not. [Banks] should get money for services that they render, not because they think they should make more money and therefore introduce a fee,” he said.
The banking regulator could use moral suasion to get banks to change their practices, he said.
“If the commercial banks don’t react, then [the Central Bank] can go to the Ministry of Finance and I am sure the Minister of Finance has the power to do it.
“If he doesn’t have it, then he can go to the House of Assembly . . . and get it. But commercial banks can be restricted from abusive practices,” he said.
Sir Courtney noted that commercial banks in the United States had also engaged in abusive practices by imposing unreasonable fees and charges as well as hiking interest rates on credit cards to astronomical levels but congress and the Obama administration had stepped in and curbed some of those practices.