Bank fees rankle Canadians. One even had a fee to make change for a $20

Sometimes it's the little things that get to you. An $8 charge if you deposit someone else's bad check in your account. A $1 charge to get your canceled checks back. Bank fees seem to rattle the average Canadian. There was such a hue and cry about them that the House of Commons in Ottawa held an inquiry into bank fees this year.

There was a lot of political posturing about forcing the banks to cut user fees. Banks promised to cut some fees, and rushed out expensive full-color pamphlets to make their case for the charges.

Right in the middle of all this, the banks totally lost the public relations battle when a teller at a Bank of Nova Scotia branch in Ottawa charged a woman a fee to make change for a $20 bill. That unfortunate incident gave political bank-bashers a field day.

But when the smoke cleared, nothing much had really changed. Some service charges were voluntarily abolished - such as charging a customer for a mistake made by a bank or charging people to close a dormant account. But the banks stuck to their line that the system must be paid for by the user, and that means fees for using the bank.

In a banking system where the fees at different banks seldom vary and where an increase in mortgage rates at Bank A is almost always matched right away at Bank B, one trust company decided to try something unusual: competition.

Central Guaranty Trust of Toronto cut user fees at its 160 branches in Canada and within a month and a half had 17,000 new customers.

``A lot of people are unhappy with the nickel and diming on services,'' says Brian Inglis of Central Guaranty Trust. ``There's been a lot of talk by financial institutions about doing something, but nothing was done. So we decided to get rid of fees.''

The trust company still charges some fees, for writing checks with insufficient funds, for example, but it has abolished charges for checks and pays interest on even the smallest balances.

For most other Canadian banks, including the six largest, which handle more than 80 percent of the nation's banking business, the reaction to Central Guaranty's move has been less than positive.

``I don't know what each individual bank will do, but I don't think they will go the route of cutting fees,'' said Robert MacIntosh, president of the Canadian Bankers Association, which represents the large banks, but not the trust companies. Mr. MacIntosh says the six big banks favor a user-pay system.

``Any financial institution that doesn't charge users will either have to transfer the costs to other customers or accept lower profits,'' he says.

But Central Guaranty Trust says it has not transferred any hidden charges to customers.

``Sure, we've given up revenue by cutting out these user fees,'' says Mr. Inglis. ``But we hope to make it back when these new customers buy other financial services, such as retirement savings plans and personal loans.''

The trust company says it has increased its client base by more than 5 percent since it cut user fees. And getting money from customers is cheaper than borrowing in the wholesale market.

This competition will be good news for the public in the long run even if the big banks say they aren't budging, says Robert Kerton, an economics professor who works with the Consumers Association of Canada. ``This is going to force big banks to be more efficient. But it's a small step, and until one of the big banks moves, there won't be any real price competition.''

There has been some change on the bank free front already. This month, according to the Consumers Association, most banks are dropping the charge for depositing a bad check in your account. The association says it will lobby to put that change into law.