There’s a phenomenon that, if unchecked, is likely to cause serious damage to our system as we know it. This is so serious I’ve even heard of “economic collapse” as a possible future. What is causing this? I imagine there is probably an argument to be made that the average North American is irresponsible – but, I will say that in today’s business climate – the best way to sure-fire profits is passive business shadiness.
Let me explain first by using Bell Canada as an example. I personally use a blackberry data/voice service and have been on one of Bell’s standard plans that cost me in the range of $200-$300 a month. After about 8 months, I finally got around to taking the time to look at some of the plans and in a last-ditch effort called Bell and they were able to find a plan that cost me half the price. You read that right, for a full 8 months or more I was paying twice as much as I needed too based on standard Bell data/voice packages. Bell did not call me to explain the situation, nor did they automatically drop my plan down to the cheapest one for me. Given that I didn’t request it, Bell was happy to charge me more. Am I irresponsible or is it reasonable to expect a service provider to crunch some numbers and cap what they charge? This passive method of gouging is becoming all too common-place.
Its possibly less evident, but clearly there, with businesses that enjoy little or no competitive pressures. Many of these businesses are known for charging their customers a lot of cash and turning major profits from that. One example is the much-vilified gas companies. They supposedly compete with each other to sell a product we required them to make. In reality, in the absence of proof, it is clear that having gas cost exactly the same in every gas station in Ontario (give for take a cent) screams of, at the very least price-fixing or collusion. The trick here though, is they say – the customer comes to us. These companies passively gouge us. Why? I expect its mainly because they can.
Credit Cards are another example. With our society being so consumer-centric, the average credit card holder is constantly enticed to buy. The credit card companies help feed their passive gouging by offering introductory rates (that cancel on a first payment), unintelligible contracts, and exorbitant amounts of interest on cards. At present credit card companies only require you pay 2% of the principal to carry a balance – if you worked it out – you’d probably die before you paid back that $5000.00 Master card balance if you paid the minimum amount. This is how many get into a credit cycle and often become over-burdened with credit. Apparently one study says that the average Canadian carries a debt load bigger that their annual income! This scenario is ripe for collapse.
These things are happening all over – banks and private companies are getting into the ATM transaction charge game. The charge of 1.50 or more per withdrawal from these ATM’s can lead to you paying more in service charges than the amount of money you actually take out of the machine. This practice is perfectly setup to take advantage of the lower-income population all under the guise of offering convenience. As is often the case the real picture is that banks have been removing their ATMs from convenient locations, giving way to private ATMs causing the average person the prospect of traveling a long distance to take out money or pay a service fee. Even retailers are getting into the game – charging service fees to process Interac cash back transactions. They will say, the customer came to us.
My question with these practices is, what is a reasonable amount of profit? When banks are allowed to tack on 1.50 per transaction for non-internal processes ON-TOP of their already high account fees – this translates for them to billion-dollar profits. Are they working in the interest of the consumer, or themselves? Even more serious, is this eroding. The health of our economic system? Who will regulate these companies of they work together an gouge the customer? What exists in our day and age to counteract the effects of consumerist types of holidays like Christmas, Easter and Valentines Day? How is the average person educated about these problems?