Doreen Frankson, president of the JMA, has led a lobby against the bank charges and interest charged by the banks. - File

The Jamaica Manufacturers Association (JMA) is proposing the creation of an Office of Financial Ombudsman, saying borrowers needed protection from the commercial banks.

"The unusually wide interest rate spreads that have prevailed regardless of government policies and the abusive bank charges ... have constrained business expansion, in particular of small and medium-sized businesses, and economic growth," said the association in a statement this week.

The association suggests that Jamaica replicates a similar institution in the United Kingdom - the Financial Ombudsman Service (FOS) - whose interventions are free to the public.

The JMA last year had lobbied the Free Trading Commission to rein in the banks, but the Fair Trading Commission (FTC) in its decision in August said it had found no cause for action.

The manufacturers charged that an "imperfect market system" has accommodated the behaviour of the banks.

"The JMA has appealed to the Fair Trading Commission to investigate these dominant practices of the banks, but to no avail. Innocent banking customers need a voice and Government must step in to provide a mechanism to defend against unfair banking practices."

The trade association said that a financial Ombudsman would offer the borrowing public to probe complaints of high transaction costs and levied charges against customer accounts.

"One of our members who went into unauthorised overdraft by a small amount had to pay $1,600 penal service charge for every cheque drawn for the month, which amounted to over $200,000 of service charges for the month," said the JMA.

"Clearly this charge is disproportionate to the amount it actually costs the bank to deal with an account in the red."

Like the FOS, the manufacturers are proposing that the Jamaican body steps in when a financial firm and consumer cannot settle a complaint.

business@gleanerjm.com