Short-term gain for long-term pain; Business owner speaks out against banks

BY SIMOME J. SMITH

“We look at these banks as partnerships, but it doesn’t feel like a partnership at all.”
Ryan Vande Vooren, Owner/Operator
Glow Zone 360

Frustration!

I could feel it through the phone. I was speaking to Ryan Vande Vooren, who happens to be the Owner/Operator at Glow Zone 360. The partners at Glow 360 have over forty years combined experience in the attractions industry. The community has benefited from a family, friendly space where you can bring your friends, sports teams, or host birthday parties.

The COVID-19 outbreak has had a mixed impact on businesses in Ontario, with some experiencing a drop in revenue while others continuing to enjoy the same number of clientele. When speaking with Ryan, he told me a little about his industry.

“Our sector is a revenue generator for this country, bringing in new money as well as keeping Canadian disposable income in Canada. It is made up of hundreds of thousands of passionate people who will do everything in their power to remain solvent so that they can continue to entertain Canadians and visitors from around the world when it is safe to do so.”

What was frustrating Ryan, as well as other businesses in his industry is how the banks have been dealing with them. Instead of sitting back like the victim, he decided that it was time to speak up. Ryan wrote a letter to Prime Minister Trudeau beseeching him to hold banks accountable.

“We are all in this together.”
Prime Minister Trudeau

In March, six banks: The National Bank, Bank of Montreal, TD Bank, CIBC, RBC Royal Bank, and Scotiabank, all put out statements that they were committed to working with their personal and small business banking customers to help them manage the challenges that some of them were facing due to the pandemic. Their support would include a deferral of mortgage payments for up to six months, as well as providing some relief on other credit products.

What some businesses may not have realized is that if they accepted the bank’s help, they would still have to pay interest even though their payments were being deferred.

In his letter to Prime Minister Trudeau, Ryan spoke boldly for business owners, and called out David McKay and the Royal Bank of Canada.

“David McKay and his Royal Bank of Canada are profiting immensely from the funds and guarantees on loans that you have provided them, instead of actually assisting small businesses. The Royal Bank of Canada is making more profit than ever on the backs of the very people you have given them funds to help.

The tourism and hospitality sector, made up of small businesses like mine who make communities across Canada vibrant places to live, work and visit, are still struggling daily to stay afloat in a COVID-19 world.”

He explains that he was denied a CBAP loan guaranteed by the government, even though they have a five-year track record of payments with RBC and had already paid them hundreds of thousands of dollars in interest.

“We are not alone in this, having heard similar stories from our peers from across the province. The one thing they did do is defer our principal payments for six months – but made us pay the interest the whole time.”

During an escalation call with Crystal Reedie (RBC Vice President of Commercial Financial Services), he shared with me that she proudly talked about the “unprecedented” deferrals that RBC was doing for its clients.

“I pointed out that RBC was going to profit immensely from this because no principal was paid down so all of the interest payments for the six-month deferrals were gravy.

I then asked if they ever considered deferring the interest payments too.

She stated that they actively discouraged that from happening because then the interest would have accrued too, adding more debt to their clients.”

“No, no, no,” he said. “Did you actually consider “pausing” the interest and principle for six months and then just starting it back up again?”

There was silence on the other end of the phone.

“David McKay’s Royal Bank of Canada posted a 3rd quarter profit of $3.2B – yes that is billion – even as it wrote off $2.83B in bad loans for the same quarter,” Ryan concluded. I had to empathise with him. He was right. It didn’t sound very good for RBC.

An article titled, “Mortgage, loan relief could end up costing you thousands more as big banks continue to charge interest” (Marco Chown Oved), RBC spokesperson AJ Goodman would not confirm if the bank would continue to charge interest during relief periods. It was later released that all six banks would continue to charge interest on loans or mortgages if customers accepted its offer to skip payments for up to six months.

I wonder how many businesses know that by offering customers “relief,” banks have increased their profits. It seems a little deceptive that banks are profiting off a program that was marketed at being there for the people.