What Bugs Me About the Banks: Part One (Editorial Blog)

I listened to CFRB1010 Talk Radio as I drove to work yesterday. The hosts of the morning show were fielding calls about over-spending by consumers and Visa's announcement that as of December 1st most of its card holders would face a five percent increase in the interest rate to an even more usurious 24.75%. This news had made the front pages of the newspapers and headlined the morning news shows here in southern Ontario, and I would imagine across the country.

A part of the Toronto Star's article on the issue--"Credit card costs soar for hard-hit consumers" by business reporters Rita Trichur and Ann Perry--related how over-spending had gotten a 25-year-old funeral director into considerable credit card debt. Clearly this young woman was imprudent and fiscally undisciplined--she was living a lifestyle she couldn't afford. Many of the callers to CFRB rightly cited this kind of overspending as contributing to the current economic woes of many people. And, it certainly does. There's no doubt that people buy things they don't need with money they don't have. But while I agree that individuals are ultimately responsible for their spending habits--good or bad--I think it's the banks that have driven average consumers into credit card debt. Unless you're borrowing for a big ticket item like a car or house (or have assets to secure a line of credit) banks are not interested in lending to individuals--particularly young people.

More than 20 years ago, when I was in my 20s, I went to the bank to ask for a $1,000 loan to pay for an unexpected repair to my car. The answer was "No, put it on your credit card." Reading through the comments attached to The Star article I discovered people were still being turned down by the banks for small loans. Here's the thing: Statistics Canada reported in its 2006 census results that the median income of all economic families of two or more people in Canada is $66,343. Considering the cost of living these days, I would bet that a lot of people are living from paycheque to paycheque and they aren't overspending on anything but food, heat, gas--in other words, necessities. If something goes awry in their lives--the water heater has to be replaced, there's a medical problem, one of the kids needs costly dentistry, the transmission in the car goes, etc.--they don't have any money to pay for the repair/treatment, etc. And the bank won't lend them the money to pay for it so they have to put it on a credit card.

Now chances are they aren't going to be able to pay the full amount back in the month and thanks to the interest charges they spiral into debt. And quite frankly, that an average person can't go to their bank and get a small loan at a reasonable interest rate makes me angry. Canadian banks make billions of dollars of profit each year. We'd have a very different economic landscape if they hadn't handed over the "small loan business" to credit card companies. And speaking of credit cards, if you haven't checked out the Retail Council of Canada's campaign against credit card fee increase at www.StopStickingItToUs.com, do it now.

Comments (1)

Herbert:

Thanks for doing this, it maust take a lot of your time. Good read!!

Posted by Herbert | September 7, 2010 2:31 AM

Posted on September 7, 2010 02:31

Editorial Blog

Commentary on retailing, shopping, consumers and the gifts and tablewares industry today by G&T editor Lori Smith

What Bugs Me About the Banks: Part One

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