Canadian banks have been rushing to invent new fees since 2008. This strategy is important to maintain their growth and inflate their stock value. One of the recently added fees is the dormant account fee. That fee was added a few years ago by one bank (don’t know exactly which one) then others followed (these bank fees are contagious).

In any case, while walking into TD yesterday, I noticed that they have waived all the dormant account fees. This was very odd, considering that TD likes new fees and new regulations (everytime I go there, there is either a new fee or a new regulation). I thought to myself, could it be that the regulating body/government banned such fees?

So, when I came back to my office, I did a quick research on the subject and found nothing supporting my theory. What I only found was that banks have to transfer dormant accounts to the Bank of Canada after 10 years. The Bank of Canada then holds the dormant accounts for 30 years or 100 years (30 years for accounts less than $1,000, and 100 years for accounts more than that). After that period elapses, the monies are transferred to the Receiver General for Canada (e.g. the Canadian government gets the money).

My research also revealed that all other Canadian big banks are still charging this fee. My guess is that TD thought that the whole fee was not worth it and it was causing a lot of overhead. So, in short, it is legal to charge a dormant account fee, but TD just recently elected not too!

So, why does an account becomes dormant?

There are several reasons:

• The account owner died and the heirs (if any) did not chase after his/her account.

• The account owner forgot about his account.

• The account owner left Canada for an extended period of time – this is mostly the case for reverse immigrants.

But is the dormant account fee ethical?

That’s a question of opinion. I personally don’t think it is – especially when taking into consideration that most of these dormant accounts belong to dead people. Additionally, the actual cost of a dormant account for the bank is zero, so, there’s no reason really to charge these fees.

Expect more fees from Canadian banks in the next couple of years since the media is stating that the economy is slowing down, because in a slow economy, banks need to create new fees/raise old fees to make-up for lost income, and, in a booming economy, banks feel the urge to create new fees/increase old fees because people can afford it.

This article (as well as all other articles on this website) is an intellectual property and copyright of Fadi El-Eter and can only appear on fadi.el-eter.com.