Innovative online bank shuts down

August 7 2009 by Ellen Roseman

Citizens Bank got lots of press when it opened in 1997. It was the first and only Canadian financial institution with a female CEO, Linda Crompton (who didn’t stay long). It also promised to bring a social conscience to all its operations.

But parent Vancity’s press release this week wasn’t as forthright as it should have been about the fate of Citizens Bank. The news was downplayed that customers were being left in the lurch.

Online banking has “become a crowded marketplace,” said Vancity CEO Tamara Vrooman. So, customers outside Vancouver will have to transfer their chequing and savings accounts to another institution. RRSPs will have to be transferred. Term deposits not in RRSPs can stay until they mature, but can’t be renewed.

The loan portfolio is being sold to TD Canada Trust, with customers’ lines of credit and mortgages being moved early next year. Some are asking if they’ll be penalized if they want to switch from TD to a bank of their choice.

Vrooman’s use of business speak is offputting. She says the decision continues Vancity’s transformation as a true B.C. success story. But where’s her apology for the inconvenience to the customers outside B.C., who were lured into opening accounts with a national bank that is no more?

Maybe the bank could have survived with a bigger budget for promotion and advertising. ING Direct and President’s Choice Financial splash their names everywhere. I was surprised to hear that low-profile Citizens has only 30,000 members, 45 per cent in B.C. and 35 per cent in Ontario.

Here’s the response I got from one member.

I’ve been with them since 2001 and am very upset they are shutting down. There are no real alternatives that match their offerings and their philosophy.

And this lament is from another member.

To say we’re angry is an understatement. They’ve been the best bank with the best rates for me since their inception. It’s unfortunate this has to happen and now that I’m shopping around for another bank, it’s astounding to see how much nickeling & diming is going on. PC Financial is the closest to CB, but still not by a long shot.

26 comments

  1. brad

    Aug 8 2009

    Wow, that’s a shocker. It’s a big loss on the socially responsible banking front, but also on the no-fee front, leaving fewer choices for people who want to bank the old fashioned way: where you put your money in the bank to watch it grow, not shrink.

  2. Charles in Vancouver

    Aug 8 2009

    Let me add that, as wonderful as Vancity is, they don’t quite have fee-free banking available the way Citizens does. I use Citizens as my secondary bank right now and I see no reason to let the account be switched to Vancity. I’m mulling over my remaining options.

  3. Randy

    Aug 8 2009

    Like all other Citizens Bank “members”, I too am disappointed and more than a little angry at the way this whole affair was handled. I actually opened an unsecured line of credit and US dollar savings account with them Tuesday afternoon. Less than 24 hours later they sent me an email saying I’d have to find somewhere else for both as well as my chequing and savings accounts that I already had with them.

    What seems to be lost in much of the discussion surrounding the closure (though Citizens doesn’t call it that) is the people like myself, with unsecured lines of credit, are being totally hung out to dry. Unlike all other lending products, these were not sold to TD and so we either have to pay them off in full, or try and apply at another bank with who knows what outcome?

    I moved all my banking to Citizens for several reasons: First, of course, their fee structure or lack of it, is a breath of fresh air in the Canadian Banking industry 2) their ethical business philosophy was very refreshing and something worth supporting and 3) despite being a ‘virtual’ bank, their customer service was head and shoulders above anything the big 5 could offer.

    Now I have to find the least of the many evils in the mainstream banks with absolutely no assistance from Citizens. I feel like I’ve been led down the garden path only to find the boogeyman at the end.

  4. Lior

    Aug 8 2009

    I have been with Citizens for a while and this surprise is definitely going to affect many people.

    On one hand I’m not surprised it happened, I just didn’t think it would happen so quickly.

    Canada’s big banks have a long record of stifling innovation and buying the smaller competition that stand in their way. We have to be realistic with ourselves: you can’t get away from the big banks and their garbage customer service and limited product offering.

    No matter where you take your business, the big banks just keep buying out the smaller companies like hotcakes to solidify their monopoly. For a bank that was so innovative to see such a dreadful demise is bad news for everyone.

    According to the memo sent by Citizens, banking customers will have until about late November to withdraw their funds and either take their business to another bank or roll it into a Vancity account if you are in B.C.

  5. Ray

    Aug 9 2009

    May want to consider Coast Capital Savings Credit Union (BC):

    1.) Free Chequing, Free Debit and More Accountâ„¢ (but you have to pay about $20 for 100 cheques);

    2.) The High-interest, No-fee Savings Account (currently paying 1.0%.

    You have to pay $5 for a membership.

  6. john

    Aug 9 2009

    I am very unhappy with Citizen’s Bank closing. I am very unhappy about the obfuscated press release which deceives the customers about what is actually happening: Citizen’s Bank is closing. I am very unhappy about losing my bank with the best rates. I am very unhappy about losing my bank with the best customer service. I am very unhappy about losing my bank with the nicest art design. I am very unhappy about losing my bank with the allegedly human-friendly ethical policy which seems to be a lie.

  7. Larry

    Aug 9 2009

    I too have to look for new bank accounts and surprised by the charges the other banks charge. Even Vancity has an online banking account but its $5 per transaction if you do anything other than move money to another Vancity account. $5 each time I use the ATM or my debit card?!

    So far Coast does seem to be the cheapest with their free chequing and savings accounts but that only benefits those in BC.

    Lior – you appear to blame the big banks for sales like these. A credit union could have bought it too. More importantly, it could ONLY be bought if it was up for sale so it appears if it isn’t making enough money for vancity, get rid of it, keep the best profit makers, screw the ethics. They just sold their insurance business for same reason. What’s next? Stop microlending?

    Off to continue checking some more bank account rates out there. The hunt for an ethical low fee bank continues…

  8. Larry

    Aug 9 2009

    Rereading my goodbye letter I received from citizens bank and the first paragraph is telling. After reading it again, it appears Vancity doesn’t want to concentrate on online banking only retail banking so they can build relationships and provide service.

    Can’t you do that with an online bank? Isn’t that is what the future is all about? Explains now why they would charge $5 a transaction for their online account. They don’t want online business…how short sighted is that? I can’t remember the last time I needed to go into a branch and it would be a hassle if I had to.

    Is Vancity now like any other bank so their difference will be to stick to retail banking? Must be going for all those seniors who don’t want to bank online.

    Ok, finished venting. 🙂

    Here’s the first paragraph of my goodbye seeyalater letter.

    “When Vancity launched Citizens Bank of Canada in 1997, we were pioneers in online banking and corporate social responsiblity. Now, 12 years later, it’s hard to find a mainstream Canadian bank that doesn’t have an online presence and evolved social practices. Vancity and its subsidiaries have continued to grow, and to deliver on our promise of service value and financial returns to the membership. Our success, in part, is based on our approach to retail banking. We are community focused, and our offering is based on building relationships and providing service.”

  9. brad

    Aug 10 2009

    I’ve been hearing rumours that ING will start making free chequing accounts available to Canadians this autumn — if true, that would be fantastic. ING has offered fee chequing accounts in the US for a number of years now, and I’ve heard only good things from people who are using it. The current ING accounts are savings only, and to get at your money you still have to have a regular chequing account somewhere. The interest I make on my ING account barely covers the fees I pay for my big-bank chequing account (PC FInancial is not available in Québec, where I live).

  10. James

    Aug 10 2009

    I was with Citizen’s Bank for 11 years and I am greatly disappointed by their closure. I am not happy about them selling my mortage to TD Canada Trust. There is a reason I’m not doing business with the big banks and to have this forced on me stings.

    I understand from a business perspective why they did it but I can tell you that while they would like ot keep my VISA account there is no way that is happening.

    I am surprised by the high fees all banks change. Since I was paying $0 $13-$15 per month for the same or less service seems steep. It doesn’t seem possible to move all of my business to a single bank and get any perks.

    I agree that Citizen’s should have been marketing. I would have told them to heavily market university and college students. Free banking plus a credit card and online service not tied to a local branch would have been appealing.

  11. Lior

    Aug 10 2009

    Larry: it goes to show that when it comes down to the basics, it’s all about money. Ultimately the no-frills banking model proved to be too costly for Vancity.

    I just received the letter in the mail today, along with TD’s insert, and I was quite surprised to see how Vancity never apologized once for all the inconvenience they’re causing people. Would’ve been nice. The rest is all nonsense about how they’ve basically stopping their banking operations to concentrate on their “core business”, whatever that means.

    In main street lingo, they’re shedding the non-profitable units.

  12. Larry

    Aug 11 2009

    Lior: It is all about money. Vancity could have kept the mortgages, loans and RSPs from Citizens bank members in BC. They said there were 45% of members in BC. But they decided not to most likely because they would not have made as much money on the sale.

    Which brings me to the question, why would I want to give Vancity my money and business with my remaining bank accounts when they didn’t want my mortgage or RSP business? To save the $5 membership fee they have so generously offered to cover? I don’t think so.

  13. Art Chamberlan

    Aug 11 2009

    Vancity has listened to its members and dropped the plan to raise rates on some loans. Details on its website https://www.vancity.com/News/Creditline/

    CEO Tamara Vrooman says —
    Our request touched off a passionate debate among you and we’ve been listening to the feedback that you’ve shared with us directly and indirectly. Many of you feel strongly about your views on the subject and about your relationship with us. To sum up what you told us, it is ‘we understand your business challenge … but … a deal is a deal’.

    Based on your feedback, as well as input from our management and staff and in consultation with our Board of Directors, we’ve decided to stop our initiative to reprice our Creditlines.

    For members who’ve signed the amendment, this means we’ll return you to your original rate and reimburse any additional interest you’ve paid. We’ll also do away with the amendment you signed and grandfather your agreement. If you’ve switched to a different product, we’ll contact you to offer you the choice of keeping the new product or reinstating your Creditline at the original rate. All members who received an amendment from us will soon receive a letter explaining this in much more detail.

  14. Larry

    Aug 12 2009

    You think WE are upset. Seems that many are peeved at Vancity. Check out the comments. Yikes!

    http://www.cbc.ca/canada/british-columbia/story/2009/08/11/bc-vancity-line-of-credit-rate-hike.html

  15. Nadia

    Aug 12 2009

    The closure of Citizens Bank has left me with the possibility of not being able to complete my degree. Like Randy I have an unsecured line of credit and have been told I may be able to transfer to Vancity, but this isn’t a guarantee. I opened an account with CB about 4 years ago, when I had a great job in marketing, I’ve decided to go back to school, and use my line of credit to help pay my way. With a summer job now, and barely any income I’m hard pressed to find another bank that will give me a line of credit.

    So with the decision of CB to close, and leaving those of us with unsecured lines of credit high and dry, for myself this means that I may not be able to finish my degree. They tell me there’s no need to take immediate action, but there is, what will I do if they tell me I need to pay back my outstanding debt in 3 months???? And how will I fund my schooling??? They really need to treat us as individuals right now, and work on a case by case basis, I have an outstanding credit rating, there has to be something they can do!

  16. Allan

    Aug 12 2009

    Having been a loyal member of Citizens Bank soon after it was launched, I too am feeling very betrayed. Not a word of apology for the inconvenience, nor any sort of gesture to make us feel like we were valued customers. Instead we get a wordy and vague generic letter telling us very little details. It’s also interesting that we got these letters sent to us a few days after the official press release that Citizens Bank was to be closed.
    Would I switch my account to Vancity? Probably not, unless they will match the rate on my non-secured line of credit. Even then I will not use them for my main banking needs. I already have been a Vancity member for over 14 years, but with the recent treatment their new CEO is giving others plus the poor handling of the closing of this bank, I have absolutely no confidence in them.
    The proud history of Vancity being the “little guy” looking out for the CUSTOMER (not “consumer”) and the community appear to be over. Burned to ashes and trampled into the ground. I moved to Vancity and then Citizens Bank because of my displeasure with the way my previous banks – Royal, CIBC, BMO and TD – had treated me over the years. I was happy because Vancity and Citizens Bank were different and actually cared about us customers. No more.
    If anyone has any good suggestions of where to turn now I’m all ears.

  17. Francois

    Aug 14 2009

    I’m really disappointed with the handling of Citizens Bank of Canada closure. A few months ago I had lot of assets with TD bank than I move all these to Citizens Bank because they better match my values. I mean mostly because they are a credit union bank and they give more back to the community to improve both my and everybody quality of life and they’re more open to members feedback. Now Citizens Bank & VanCity are saying they move all my Citizens Bank assets to TD. That’s not going to happen. Over my dead body 😉 I’m now shopping for another credit union bank in Vancouver area. Any suggestions for another credit union bank that would match my values?

  18. Dawn

    Aug 14 2009

    I was so proud of CB – electronic, ethical and great customer service (Vancity employees). Coast Capital has a potential but their phone line isn’t 24/7, and they don’t seem to be able to match a prime plus 2 line of credit (plus 3 seems to be their best rate.) Their new ceo sounds more like someone I’d like to work with (Vrooman was formerly in our prov. liberal government – bleh).
    Apparently if even we switch to Vancity the history of our accounts (mine dates back nine years) cannot be electronically transferred. You’d think that with the same system that could happen, but I guess innovative thinking is what we’re losing.
    I don’t want to pay a $7 service charge or have to keep $1000 in my account: its my money and I want to use it.
    I want VanCity to fight for our membership – and we can demand it if we ask for it, but we need enough voices don’t we.

  19. brad

    Aug 14 2009

    @ François: I don’t know if it’s possible to have an account with Desjardin’s Caisse Solidaire outside of Québec, but their ethics and values are right in line with what you are looking for. Unfortunately because they are part of the Desjardins Credit Union you pay fees, comparable to or higher than those of any of the big banks. But the Caisse Solidaire is great and they are doing good things with their money. They have online banking, Interac, and all the other usual services. I have been planning to switch my accounts over to them for some time now; it’s just that switching banks is always a hassle.

    Here’s the link to the Caisse Solidaire’s website:

    http://www.cecosol.coop/

  20. Online-Bank.ca

    Jan 23 2010

    To be honest, while it’s sad to see one of the pioneers quit the business, there’s so many alternatives that most account holders should be happy that it happened.

    There’s many, many other awesome online banks in Canada, such as ICICI, Ally, ING, PC, CTF and others.

    Here’s a pretty full list of Canadian online banks – http://www.online-bank.ca/online-bank-canada/

  21. JLS

    Mar 30 2010

    I have an unsecured line of credit there for many years, plus my mortgage. Now my mortgage is transferred already and I am being asked to pay out the LOC. I am not in a financial position to pay out the LOC, but have paid all the monthly amounts as required.

    Has anyone been offered payment options from Citizens on a LOC?

    The original information Citizens printed was misleading, when they said they were selling all credit products to TD. In fact, this was not true, as the LOC was not sold. A LOC is a credit product.

    They tell you in small print that all credit products are to be paid in full by March 31, 2010. This is a bad time to get credit with all lenders being so careful. I am sure that is why TD did not buy the LOC, but only the secured mortgages.

    If they call the LOC on everyone, your credit will be untied for many years and this could also affect mortgage renewals in the future.

    These guys have let a lot of people down and will be putting them in a bad position. Anyone hear of any arrangements Citizens has been making for LOCs other than full repayment??

  22. Janet

    Jun 24 2010

    It’s incredible to see the word “awesome” in the same sentence as ICICI.

  23. Janet

    Jun 24 2010

    My previous comment sent too soon. I am on the brink of filing a complaint with the federal banking authorities about ICICI, since two years after they agreed to close my account, and even after I paid a ‘fine’ I levied against them for their terrible practices, they are now about to charge me fees for my “inactive account”.

    I know from experience there is no point discussing this with them, so I’m going to go right to the end point of the dispute resolution process in the industry.

  24. scrabble solver

    Jun 26 2010

    I’m not worry they should be back soon, cause there is really a market. In France, they have now 2 or 3 online banks with 0 fee…

  25. HGH

    Aug 21 2010

    So with the decision of CB to close, leaving those of us with unsecured lines of credit high and dry, this means that I may not be able to finish my degree.

    They tell me there’s no need to take immediate action, but there is. What will I do if they tell me I need to pay back my outstanding debt in 3 months???? And how will I fund my schooling???

    They really need to treat us as individuals right now and work on a case by case basis. I have an outstanding credit rating. There has to be something they can do!

  26. HGH Injections

    Oct 11 2010

    I don’t know if it’s possible to have an account with Desjardin’s Caisse Solidaire outside of Québec, but their ethics and values are right in line with what you are looking for. Unfortunately because they are part of the Desjardins Credit Union you pay fees, comparable to or higher than those of any of the big banks. But the Caisse Solidaire is great and they are doing good things with their money. They have online banking, Interac, and all the other usual services. I have been planning to switch my accounts over to them for some time now; it’s just that switching banks is always a hassle.