Amendments to Financial Institutions Act offer no protection from unjust bank fees

Dear Editor,

The amendments to the Financial Institutions Act do not provide for the protection of persons or companies from high fees, high interest rates and other charges implemented by banks, which may be unjust.  Financial institutions can do as they feel, raise fees by a 100% give you 1% on savings, and then charge you 18% on loans, using the people’s money to make billions annually. As I scrutinize the Financial Institutions Act to see which part of the Act has protection for customers from high interest and unjust bank fees, I found none.  At present, some financial institutions may be double dipping by charging the accountholder a fee to debit his or her account when a cheque is changed and a $500 fee from the person who came to change the cheque. Why should a person pay a fee for changing a cheque at the same bank that issued the chequebook to the account holder? 

Another unjust system I have noticed, two financial institutions have a policy, if they charge customers a fee of $1000, which takes the customer’s account into overdraft by $20 because your account only had $980, the financial institution will then give its customer an overdraft of $20 to clear that fee, then charge you a fix $3000 interest on $20 overdraft. If the customer does not check his/her account on time to clear the $20 overdraft a next $3000 interest will be placed on their account the next month. This, I consider is white collar crime.

The other unjust system is compound interest, why should a person pay 18% upon 18% interest due, when there is a vast difference between savings interest and lending interest, why not the rate of savings interest applying as the rate of compound interest?  It is in my opinion that compound interest should be banned, or be at the rate of the savings interest 1 to 1.5%.  In the Money Lenders Act, licenced money lenders are prevent from charging compound interest, but the Financial Institution Act which the Banks fall under does not have such regulation to prevent unjust compound interest. 

The Bank of Guyana has a duty not only to protect Banks from going bankrupt as the last amendments did, but also to prevent profiteering by banks. While, I have no problem with Banks making big profit in a just manner, I have a problem when they raise fees without notifying the public. One ATM fee moved from $20 to $70. Some fees rose from last year to now from $500 to $1000. The Banks are conducting millions of transactions yearly because both government and private sector employers are paying their staff through the Banks and as a result this increases Bank profits enormously due to persons having to pay for every transaction done to get their money. 

The raising of the ATM fee needs to be capped, it is too high.  The Financial Institutions Act, Section 33 (1) states “Where, in the opinion of the Bank, (Bank of Guyana) a licensed financial institution, or any affiliate, director, officer, employee or agent of that financial institution, in conducting the business of the financial institution, is committing or pursuing or is about to commit or pursue any act or course of conduct that is an unsafe or unsound practice or a violation of any law, or order, direction, notice or condition imposed in writing by the Bank, the Bank (Bank of Guyana) may direct the financial institution or person concerned to- (a) cease committing or pursuing the act or course of conduct.”  As a Member of Parliament , I tried to get the definition for the words unsafe and unsound practice in the Act, but no one can say what it means, one Banker said to me, “Carrington the Financial Institutions Act does not have protection for customers, from unjust systems or exploitation, banks can do whatever they want.” 

From what I have gathered over the years many persons may have lost their property, not because of the capital borrowed or simple interest but because of the high compound interest charge when a person encounters financial difficulty.

The Bank of Guyana is failing to put regulations in place to prevent exploitation by Banks.

There are other lending institutions in Guyana that do not fall under the Financial Institutions Act nor under the Money Lender Act, yet at one time were charging 40% interest on loans. It is not only the Banks that have unjust systems but other financial institutions that finance higher purchases using the item as a Bill of Sale. When you purchase an item on higher purchase, you are indirectly given a loan, the item becomes a Bill of Sale item, which secures the loan items and can be repossessed if the money is not paid on time. 

One institution hides the word “interest” under the name “delivery cost” on your agreement, because they know that 40 to 50% interest on a Bill of Sale loan is illegal in accordance with the Money Lenders Act.

The Bank of Guyana, the Ministry of Finance and the Consumers Protection Agency need to look in to these unjust practices by financial institutions. I am calling on APNU and the PPP to get themselves in order, we had too much of fighting over the years, and for the AFC leadership to stand strong as you were in opposition. Stick to your principles and do not deviate to please the other side.

Yours faithfully,

Michael Carrington MP

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