TD hits customers with fees for inactive credit lines

Here’s a new bank charge that is making people angry. I got three emails from TD Canada Trust customers today, complaining about the new inactivity fee.

Starting in March, if you have an unsecured line of credit and if you haven’t used it for a year, you will have to pay a $35 fee. There’s a cost to maintaining that credit line, you see, and TD has decided the customer has to absorb it.

Check comments below to see the indignation from clients getting the news and the TD response.

Author: Ellen Roseman

Consumer advocate and personal finance author and instructor.

37 thoughts on “TD hits customers with fees for inactive credit lines”

  1. Hi Ellen, I read your columns in The Toronto Star regularly and always have a lot to learn! Thank you!

    I recently received a form letter from TD Bank, with whom I have had a line of credit for the last 10 years. The letter was dated January 19, 2009 and informs me that I will be charged a $35 inactivity fee starting April 30, 2009. I recently used my line of credit in Dec 2008, as I sporadically do, to spot my credit card bill to be paid in full while cash flow is in transit.

    The letter goes onto state that as of Oct 31, 2008 my last transaction was May 2007, and that I will only be charged the inactivity fee if I did not use the account for 360 days after that. Is the bank justified in charging me, even though I was only informed this month and I actually did use my line of credit last month? I am baffled. Please help!

    Also, what are my alternatives when I am in a tight spot and don’t want to hold a balance on my credit card? Do I just make it a point to use my line of credit twice a year for a day, to avoid the $35 charge?


  2. I have a line of credit. Actually, I have two. One is secured, the other unsecured.

    The latter has a zero balance and I plan to keep it that way unless something really major comes up. The former has the last part of a new furnace on it, and will be paid off as soon as possible. I figure that a furnace is an expenditure which can be legitimately carried over. It is not something that one can easily do without.

    I was perturbed to receive a mailing this week from my bank stating that I will soon be charged an “inactivity fee” of $35.00 if I don’t use my unsecured line of credit.

    At a time when so many people are experiencing real difficulties as a result of debt, they really get people either way. If you carry a balance, the interest rate added to prime is increasing. If you don’t, you pay a fee anyway. It seems to me that my best option here is to cancel the line of credit and hope that I don’t need it.

    I especially like the Orwellian doublespeak in the letter: “These changes are being made so that we can continue to offer you the convenient, competitively-priced credit you have come to expect…” What? Paying a fee for NOT borrowing is competitively-priced?

  3. My wife received a statement from TD Canada Trust a few days ago.

    * The company will start to charge an ACCOUNT INACTIVITY FEE on Line of Credit account, if the customer doesn’t use it for a period of time – something entirely new for them to grab more money from consumers.

    * The company will charge more interest rate from the LOC borrowing – 3.75% on top of prime rate.

    My wife has not used the LOC at all. And now, they are trying to force her to give them some money?? Either in the form of loan repay or by IN-ACTIVITY FEE?

    Isn’t it the government objective to help Canadian people to live through this round of severe recession by lowering the borrowing rate? And, try to make the bank in line with their effort to help Canadian people? What do you think.

    PS. By the way, we lost 2/3 of our household income few months ago and we cannot afford our RRSP and RESP contribution any more. Would TD Canada Trust want to make money from us by LOC borrowing or whatever fee excuse?

  4. The interest rate increases come into effect in March and reflect the continued rise in the cost of lending. They will help us continue to offer convenient access to funds at a very competitive rate.

    The inactivity fee applies only to unsecured LOCs that have had no activity — that is. no payments or withdrawals and a zero balance/credit balance for 360 consecutive calendar days.

    The fee can be avoided if a customer uses the LOC (the 360 days will be reset). Inactive ULOCs still have to be maintained in order to ensure credit is available in the account and there is a cost associated with that.

    These changes do not impact StudentLines or secured lines of credit like HELOCs.

    As always, we continue to work to balance our customers’ goals with prudent business practices, which is especially important during the current economic downturn.

    We know some of our customers will have questions and we encourage them to contact us to discuss their particular concerns. We can discuss these changes as well as a variety of options available to them as TDCT customers. (e.g. alternative products)

  5. Negative option billing is perhaps the best way for companies to turn off longstanding and loyal customers.

    I have been a customer of the TD bank for nearly 20 years. We have been happy with their services and have even raved to friends and colleagues when they have some particularly great feature or benefit.

    Imagine my surprise when on Jan. 20 I received a letter in the mail that basically said “You have a dormant unsecured line of credit and unless we hear from you by April 30, we will be billing you for the service you are not using.”

    Well, my first reaction was one not of annoyance, but resignation that here was one more thing I needed to add to my ‘to do’ list.

    On Jan. 26, I called to cancel this product I was not using. I was placed on hold for over 20 minutes.

    When a human finally answered the phone, and I commented on the lengthy wait, his comment was that they were very busy recently.

    Hmmn, let’s think about this. “Sent thousands of customers a letter stating that you will be charging them $35 for something they are not using unless they call, and then be surprised that you are getting lots of phone calls.”

    I have asked the TD customer service department to contact me and await their explanation of events to date.

    Needless to say, the TD is not my favourite bank at the moment.

  6. Hi Ellen — in my last email I made reference to cost of borrowing. Here is some info Economics sent me last week that explains that and also talks about flow of credit.

    From: Alexander, Craig
    Sent: Friday, January 23, 2009 2:38 PM
    To: Hechler, Kelly
    Subject: RE: Re rate increases


    The Bank of Canada posted data today on the credit flows in December. The numbers clearly show that credit is flowing.

    I would also note, that while the rates on uncollateralized loans may be tightened, we just cut mortgage rates significantly.

    So, uncollateralized loan rates are being adjusted in an economic recession, but collateralized loan rates are improving – both of these trends reflect the changing risk environment.

  7. Doing business with the banks is like doing business with the devil. On this topic, I will just say the banks are milking the consumer in every way, shape, and form. And what a time to milk the consumer it, with unemployment expected to rise and people’s portfolios, property, and overall net worth dramatically declining. Just when you think the banks can show some understanding, think again.

    Banks love it when people are deep in debt. The interest payments and exorbitant service charges is what keeps the banks’ profits afloat. Just as long as people keep those minimum payments and interest payments on LOCs coming in on time, as far as the banks are concerned, you are a stellar customer.

    Ah, but what about those who pay off their balances in full every time and only use a LOC when they absolutely need it? This, theoretically, is finance 101 and how credit is meant to be used. It is not meant to be used as a supplement to your income. With the exception of the mortgage, perhaps, consumers should only use credit for short term spending. They pay the debt off quick, save themselves a whole bunch of interest costs, and the money is available to be used only whenever necessary.

    So how can the banks charge for a service that is not being used? The banks argue that if you have a LOC, they have to keep the funds readily available for you. And given that their own borrowing costs have increased with all the credit crisis and subprime mess, it’s only fair to pass the expense to the consumer. But I say bull$%#! Who exactly is regulating that expense? Unless there’s actually some process in place that the banks can prove that keeping a seldom used line of credit in place is costing them money, then it really is a scam. And that’s especially morbid when the government is working, and has been for months, to buy risky assets off of the banks’ balance sheets to loosen lending.

    Remember when back in the summer airlines raised fuel surcharges left and right and instituted all kinds of limitations about the weight of the baggage to cope with record high fuel prices? Well, at least now that oil prices are down, many airlines have went on to cancel the extra surcharges. And plus the high oil prices is something we all saw and felt, so there was no question about the legitimacy of raising these surcharges. But there’s no such transparency with the banks. Should things turn around for the economy, and things will turn around eventually, would the bank rescind this charge? Ha ha and HA!

  8. I wonder if TD actually wants to have people close their inactive unsecured lines of credit. I have a very old line of credit that I haven’t used in years and keep in case of emergency. I can’t see how the bank would know whether I’m still a good credit risk.

  9. Use your LOC to make some trivial bill payment. Once!
    Then pay the thing off ASAP. Today!
    Repeat once a year.
    End of story.

  10. I received that letter and called TD the same day to close the LOC. I told them the truth: I have another unsecured LOC with ING, no fees, much lower interest rate (4.7% right now). I have no need of their expensive product.

  11. Many people like me obtained a line of credit when we anticipated large expenditures like a daughter’s wedding.

    Now, years later, the house is paid off, I have no large debts and am a senior, so I thought that I had escaped 99% of the service charges.

    Well, some financial genius figured out that a large chunk of the LOC was held by seniors who would not need to use the service for years at a time, ergo the fee.

    Long story short. A phone call this morning will tell them what they can do with their fee.

  12. I was thinking the same thing as Michael James — this sounds like an incentive to get customers to close their LoCs. That gives the bank the opportunity to open new ones if they are needed later at higher rates, and, if I understand the banking system properly, removes some of their need to raise costly capital now. I don’t think the plan is to ever actually collect this fee.

    I’m a TD customer with a LoC, but I haven’t received this notice (or the one about rates going up) yet. Does that make me lucky or just in the dark?

  13. Potato, I believe it is even more self-serving than you suggest. It looks to me as though the banks are worried about too much UNSECURED credit being available to customers who may not be able to pay it back. The result of this fee introduction will be that many of their customers will close these accounts, thereby reducing TD’s consumer credit default risk profile. Also, if these customers that close these accounts then require credit in the future, they are more likely to use their credit cards than reopen an unsecured LOC, and credit card rates are much higher than LOC rates, giving the banks a much higher reward in return for the higher risks they are incurring during these turbulent times. Crazy like a fox, these TD bankers!

  14. I have been a loyal customer of TD Canada Trust for years. Their service has been great, so I am about as committed a customer as they can get.

    I have had an unsecured line of credit with them for years, an account which has been inactive for about eight years. My credit rating is as high as it can get, never having missed a payment for anything in over 45 years.

    Then I got “the letter”. I was furious. No warning, no lead up period, no “this change will take effect from”, etc. It was like I had been dragged off the street into an alley and mugged by a person I had come to trust.

    What kind of corporate genius goes about communicating with customers in such a callous way? A 20 minute wait on the phone to speak with a representative further added to the insult.

    This is not about whether the changes are needed, justified, reasonable, whatever. It is about changing the rules behind your customers’ backs, then sending them a poison pen letter with an ulterior motive. This kind of approach to customer relations is totally repugnant. Whoever in TD came up with plan of execution for this measure should be fired, or worse.

    Bottom line, my relationship with my bank is soured. Great job, TD.

  15. I hate to ever be accused of agreeing with a bank or service charge and, as usual, this one is likely opportunistic and excessive. There is a “but” though!

    Banks actually do have several costs associated with unused LOCs. One is a system cost of maintaining and updating records of the account (change of address, etc.) and is quite small.

    The other cost, however, is a regulatory requirement to utilize the bank’s capital as a hedge against potential future losses.

    The loss potential is based upon the total available credit, not the utilized credit. Add up thousands of unused LOC limits and you have millions of dollars in potential risk and the bank has to assign actual capital reserves.

    As anybody reading the news will know, bank capital is an issue these days. This move will improve the bank’s capital position and that may be a large incentive to make the unpopular move…..then again, it could just be massive greed too!

  16. I’m pretty sure you don’t get charged a dime in interest unless you carry a balance on the ULOC overnight. So you just transfer in some funds to restart their counter and then transfer them right back out instantly.

    Wouldn’t it be neat if their recurring payment service allowed you to setup a yearly recurring payment into the ULOC and out of the ULOC to repeat every 359 days. Problem solved.

  17. Thanks Bylo. That release had Kelly’s name on it too. Hard to believe that some blog drives Big Bank policy but it just did. Unreal.

  18. So, this decision was so bad, and the damage to customer relations was so great, that TD has had to do a complete about-face and cancel the $35 inactive fee. All loss and no gain for them.

    Now, who bears the responsibility for this disaster? Who at the top has caused the company so much damage that he or she has been fired for cause?

    Either that or TD is content to be run by idiots.

  19. So, I guess it would be better for Canadians if we ended up like Iceland with every single bank going down the tubes?

    People, banks charge fees in order to keep offering their lending and investment services to the public. While the unused LOC fee wasn’t exactly a popular one (I don’t particularly agree with that one either), you need to realize that in order for banks to keep lending they need to be making money too. You can’t have it both ways.

    But, the typical Canadian way is to want it both ways. Sorry…you either get banks or you get Iceland. Pick one.

    And did no one see the part about freezing fees for 2009? Has any other Bank done that yet? No. You’re damned if you do, and damned if you don’t.

    So what if the change was made due to pubic outcry? At least, TDCT made the change. Now the others will too…but TDCT led the pack. Remember that next time you call PC Financial and try to get that hold removed off your account using their telephone “service”.

    By now you’ve probably sensed that I work for a bank. I do. I’m not a money grabber. I’m proud of what I do and who I work for. I’ve spent each and every working day trying to help people like you get new homes and cars, save for your childrens’ education and build retirement plans. I’ve supported people with estate matters and helped them open their first bank accounts. And I’ve done it all with a smile on my face and incredible amounts of patience, despite the complaints that pour in on a routine basis. Can you say the same?

    Did you know that TD was one of just 5 Canadian businesses to make this year’s list of the 100 most sustainable global organizations? Did you know TD gave $32.6 million in charitable donations in 2007? And that TD has supported over 16,000 Canadian environmental projects since the inception of FEF?

    I said it earlier and I’ll say it again…decide how you want our financial industry to go in Canada and accept reality. You can’t have it both ways. I think we have it pretty darn good.

  20. It is amazing what a blog can do. TD bank has cancelled the $35 charge for an unused LOC that was flogged to me a number of years ago “because everyone needs one.” I sensed it was a sales campaign at the time.

    When I cancelled my LOC on Jan. 30, the branch staff suggested that I have one tranaction for $1 once a year to beat the charge!

    TD’s online banking “EASYWEB” is far from easy to use. After 2 phone calls and a visit to the bank, they cannot connect 2 acounts together and I must make another trip to the bank to sort it out.

    Well, there is a cost involved, but can I invoice the bank for my time & expenses? OH NO. We are really sorry, sir, let me put you on hold again. Blah Blah Blah!

  21. Yes We Can is floating in a deep sea of ignorance.

    Banks need to charge fees to maintain profitability, but how can he justify the extremely high profitability of Canadian banks, which is not due to excellent management but due to lack of competition?

    This lack of competition results in unreasonable fees being charged. This is called gouging.

    The banks were given taxpayers’ money, but they are still increasing fees to pay inflated compensation to their executives.

    Unfortunately, we Canadians are used to lack of competition not only in the banking sector but in insurance, gasoline etc.

    It’s high time the fees and lending were offered at reasonable rates so that consumer spending increases and the economy recovers, rather than using the recession as an opportunity to gouge customers.

  22. ML, you obviously didn’t read my comments in full. I work for a bank, so I think I’m pretty well versed on the ins and outs of lending.

    Lack of competition? Aside from the Big 5 Banks, there are 8 major credit unions, 14 small to mid-sized banks, and approximately 28 foreign-owned banks with operations in Canada. Sounds like healthy competition to me! You decide where you want to bank…you drive the competition.

    Or…we could adopt the US model and have a different bank at every street corner. In August 2008, there were nearly 8,500 FDIC-insured banks in the USA, of which 58 had failed since 2000. Guess how many Canadian CDIC member institutions have failed since 2000? NONE. I wonder why that is?

    You can blast TD all you want, but the fact of the matter is we have a much more transparent, fiscally responsible system in Canada than anywhere else in the world. TD has done exceptionally well during these economic times, due to well planned and intelligent business decisions. If anything, TD has earned a leadership position with regards to how it has performed during very difficult times.

    If you want a stable banking system (and I’m guessing you do), you need to recognize that there’s a cost for stability.

    Maybe the $35 LOC charge wasn’t the best example of this, but you get my point…”ignorant” as it may be.

  23. Maybe they should award their staff SR points for closing inactive LOCs.

    Before they pushed the LOC on me, I’ve never needed or used it. However, since I know they have to meet quota for their points per month or risk getting poor performance reviews, I let the sales staff open one for me.

    I have all sorts of accounts with them because of their SR system. They really ought to review their staff policy and reverse it, if it’s costing them money. They should do the opposite, it would get them the same results without scaring the hell out of their customers, and you’ll have improved customer service.

    After all, it’s hard for them to justify closing accounts if all the points are awarded to opening all sorts of accounts with an existing pool of customers. There’s probably no incentive given for closing accounts.

  24. I’m sick and tired of hearing people complain about rate increases and service fees. I work for one of the big 5 banks and have been processing investments along with loans since 2006.

    There is a deep concern, as less and less people are saving and investing while more and more are borrowing. This is simple math… the default rates on PLOCs and other unsecured loans have increased tremendously.

    No doubt the banks are trying to make money, while we are performing in a stable manner, there is a HUGE lack of cash flow with all 5 banks. The Bank of Canada can decide to do whatever they like, but they don’t know what’s going on truly with our clients.

    So stop nagging, don’t spend what you can’t afford and save for the future!

  25. FURTHERMORE, for those who say, oh my PLOC agreement doesn’t allow them to jack up my rate, you are mistaken. Your agreement says your rate is BASE RATE +/- “x”%… and the BASE RATE is set by your financial institution, which indicates that it is SUBJECT to change.

    People, get it straight, this is money being lent to you, you don’t have the RIGHT to it, it is a PRIVILEGE, if you are so unhappy, pack up your bags and go.

    And for those who don’t have a LOC, and who complain about basic charges on your chequing account or savings account, again, you signed the client agreement and are aware of it.

    If you’re unhappy, cash out your account, put the money in a shoe box and hide it under your bed, or go to ING DIRECT. For those who keep comparing TD, BMO, CIBC to ING, get it straight, they don’t have any physical branches…

  26. I was interested to see the (rather irate!) comments from PCG OP regarding increasing default rates on lines of credit. These comments sound very similar to the credit card company refrains that high interest rates are necessary to cover the costs of defaulting customers. Might I suggest that if your institution was a little less “assertive” in pushing their credit products, they might end up with fewer defaulted accounts?

  27. In response to Cautious Borrower, I do appreciate your comments and as a consumer myself, I know where you’re coming from, however you need to be very cautious when you refer to credit card companies, whether it’s a TD VISA, CIBC VISA, BMO Mastercard, you need to know that they are different entities than the bank, no doubt about it, they are still companies who want to generate money through high interest, nobody’s denying that fact but they have a different agenda than the actual bank. I’ll speak for myself, I am credit and investment qualified so I handle both products, and I can tell you that for the past 3 years, my institution never promoted or recommended LOCs or Personal Loans…and by far, we are the most conservative ones (a lot of clients actually get frustrated because we have a lot of TDs (turn downs))…however when a client comes to you with 4 maxed out credit card with rates of 19%, it is the logical solution in offering the client a 6% LOC and have them consolidate the debt and cancel the cards… But we don’t offer that to every client who comes in to open up an account, it is always a last resort kinda deal… we are much more investment oriented as this helps the client save and brings deposits and cash flow for the institution vs. LOCs or loans which are liabilities… but that’s my personal opinion…

  28. I think what TD has missed in this is the cost of losing the related business they will now lose because they are proposing this ridiculous fee.

    I have a web broker, direct trading, focus rsp, savings acct, chequing acct, VISA card as well as this unfortunate inactive line of credit. I’m closing them all and transferring the balances to my credit union. Enough.

    It’s not like we don’t already pay a charge every time we turn around with the bank. I’ve had these accounts with TD in some cases for 25+ years, but no more. TD should calculate the cost of losing these accounts before they try to add just one more fee.

  29. I am happy to share that TD will be canceling any fee increases implemented in January of 2009, and is freezing any future fee increases for the rest of 2009.

    Clearly, TD Canada Trust cares and listens to its customers. This is why TD is the #1 bank in Canada!

  30. The $35 fee was outrageous, but really wouldn’t have impacted me.

    The 0.5% increase though does (4.4% over Prime, when BMO is going to 3% over prime is ridiculous) … doesn’t anyone think that they included the $35 fee at the outset, always with the intention of withdrawing it, to slide in their percentage hike?

    One need only carry an average balance of $7,000 over a year to end up paying that extra $35 in interest.

    PCG OP, no one buys what you’re peddling. TD is looking to cover their losses elsewhere in this crisis by hittin’ the lowly consumer, pure and simple.

    I’m any bank’s dream borrower and have a mortgage up for renewal this year to boot. Unless they wow me with a great rate for both my mortgage and PLOC, then I’ll vote with my feet and be gone.

  31. I have been notified by Scotia Bank that my Line of Credit interest rate is being increased to Prime + 1%.

    Can the Banks explain, why they are increasing their lending rates and services fees, while the Bank of Canada is reducing their lending rates and the economy is such that Canadians need to have the money in THEIR pockets, rather in BANKS’ pocket??

    Remember, long time ago, the then opposition leader, Stephane Dion, talked about the $1.50 * 2 service charge charged by banks to access Shared ATMs? nothing happened. we still pay that extra $3. Now all these additional fees and charges..

    Who looks after us, the Canadian public??

  32. I had received a form letter from TD Bank, with whom I have for years had a line of credit.. but which I’ve never used. The letter informed me that I will be charged a $35 inactivity fee starting April 30, 2009.

    I didn’t do anything, but likely should have written back saying “thanks for nothing… and be sure to cancel the line of credit”.

  33. Can a bank take away an unsecured line of credit if you no longer use it? Do they give you prior notice of this? I want to keep mine for emergencies, but all this talk of TD creating a situation on purpose to cause clients to close their LOC’s makes me wonder.

  34. Banks will do whats best for their profitability. I don’t have a problem with that.

    The problem I see is the banking system is deficient of competition. Also – banks operate fraudulently using fractional reserves.

    But the fundamental problem is that we and everyone else in the world uses debt-based money. Please do not under-estimate this. The minute you wrap your head around that – you’ll figure out why people are in such financial distress and banks keep being bailed out.

  35. “Yes We Can” (facepalm) posted….
    Jan 31 2009

    “So, I guess it would be better for Canadians if we ended up like Iceland with every single bank going down the tubes?”


    Banks fraction out the money you give them 9 times over. They make all kinds of money if you didn’t notice.

    Good grief, you’re either dim beyond belief or a bank employee.

    smh…avoid sharp objects, standing on chairs, and all stairways…Darwin will win.

  36. I’ve been a TD client since 1988 roughly. Up until the last couple of years, I’ve been happy with them. The problem is the money grab they’ve been introducing. The front line staff have to put up with the gripes and groans from clients struggling to survive this recession.

    A few billion net profit each quarter isn’t enough for TD. They need to drain everyone dry in the process.

    Well, I’ve had enough and since May I’ve started moving my money elsewhere. The only thing left with TD is a chequing account and secured line of credit. The LOC is paid off and once my TD insurance expires, I’ll be replacing it as well.

    For the first time in longer than I can remember, I’ve been receiving interest on my deposits. It takes about a month to migrate away from being dependent on them. Well worth the effort, IMHO.

    So long TD, it is nicer on the other side.

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