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[Recorded by Electronic Apparatus]

Thursday, March 15, 2001

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The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order.

As you know, this morning the order of the day for the finance committee is Bill C-8, an act to establish the Financial Consumer Agency of Canada and to amend certain acts in relation to financial institutions.

It is our pleasure to have the following witnesses with us: from the Canadian Community Reinvestment Coalition, the chair, Duff Conacher; from the Insurance Consumers Group, William R. Podmore, president; from the National Anti-Poverty Organization, Pam Kapoor, assistant director; and from the National Council of Women of Canada, Ruth Brown, convenor, health and welfare, and Maria Neil, convenor of economics.

Welcome. I didn't miss anybody, I hope. Many of you have actually appeared in front of this committee before and understand how it functions. We usually give five to seven minutes for your presentation, and thereafter we engage in a question and answer session.

We will begin with the Canadian Community Reinvestment Coalition, Mr. Conacher. Welcome, and good morning.

Mr. Duff Conacher (Chair, Canadian Community Reinvestment Coalition): Good morning. Thank you very much, Mr. Chairman and members of the committee, for this opportunity to speak to Bill C-8 and present the Canadian Community Reinvestment Coalition's response to the bill.

The coalition is made up of over 100 anti-poverty, community economic development, consumer and labour, and small business groups, representing over three million Canadians from every province and the Northwest Territories, and it advocates generally for increased bank accountability in Canada.

You should have a brief that summarizes our concerns about the bill. It was sent to the committee last week, and is, for obvious reasons, not dissimilar from the brief we submitted when the bill was in the form of Bill C-38.

Our first concern is in the area of community reinvestment and overall accountability. Overall, I know the difficulties the committee faces, given that this bill is really a framework, that regulations will define the rights for financial consumers, businesses, and communities and responsibilities for financial institutions, and that you will never have a chance to see those regulations or review them. As a result, you're in a difficult position, signing off on a bill when you don't even know what its effect will be. That is why I urge you, as you listen to my comments, to note the proposals we are making. I urge the committee to make very strong recommendations, both to the minister and back to the House.

We recommend, first, that many of the things that are left to regulation be put into the law, to create clear rights and responsibilities that are reviewed fully by Parliament; and second, if measures are not put into the law, that at least the gaps that we've heard are going to be in the regulations be closed.

The first area is public accountability statements. As the Senate banking committee noted when reviewing this proposal back in the fall of 1998, public accountability statements can very easily be public relations statements. From what we've heard from the Department of Finance, the regulations that will define the content of these statements will be so vague that they'll essentially be useless in respect of the public's holding financial institutions accountable.

So the public accountability statements, I urge you to recommend strongly to the minister, should be much more detailed, and beyond that should also be reviewed. There should be a grading system of banks' performance in service to the public. They've done this in the U.S. for over 20 years, as I'm sure all of you know by now from our submissions in the past, for 8,000 banks. We can certainly do it here in Canada for six big banks and a few other small ones.

Moving to the area of consumer protection, in the matter of access to banking services we are concerned, because there is not a clear right to open an account set out in the bill. From what we've heard from the Department of Finance, the regulations will leave a huge loophole, which is that they will allow tellers, at their whim and with no evidence, to arbitrarily decide that a person applying for an account is applying fraudulently or using fraudulent ID. The teller will then be allowed to turn away the person. This loophole will allow the banks to continue to turn away people with low income from opening accounts, totally arbitrarily and unjustifiably.

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What we believe should happen is that the staff person at the bank or other financial institution should, if they feel the application for the account is fraudulent, be required to contact the police to report the fraud, and the police will determine whether a fraud has actually occurred. The person should be required to open the account in the meantime, and the banks can fully protect themselves from any problems by simply requiring that the person cannot take money out of the account until the money clears through it.

If you leave this loophole open, if you leave any loophole, the banks will continue to abuse people with low incomes. It's been proven beyond a shadow of a doubt that the banks do not want to serve people with low incomes. They will use this loophole to continue to arbitrarily and unjustifiably turn away people with low incomes from opening accounts.

In the area of cashing cheques and holds on cheques, as in the U.S., the bill should say very clearly that people have a right to their money after it clears. Instead, all the government is requiring the banks to do is explain their cheque-hold policies, and again they'll continue to abuse people with arbitrary cheque-hold policies, mainly aimed at people with low incomes, to discourage them from opening and maintaining bank accounts. So again, if you don't close this loophole, you will essentially be allowing the banks and other financial institutions to continue to abuse Canadians arbitrarily and totally unjustifiably.

In the area of branch closures, there should be a full review of the withdrawal of service. As again we've heard from the Department of Finance, the regulations will allow banks to close many branches, without any review in many instances. The review will be very incomplete in any case, where it will take place, because it won't require the banks to justify the closure in any way. We want the banks to be required to disclose the branch's profit-loss record and net income for the previous five years, to prove that the branch is unprofitable and therefore justifiably could be closed.

In the area of transparency and disclosure, once again the bill gives the cabinet the power to make regulations, instead of setting out clear rights and responsibilities in the bill. Again it's a loophole that will continue to allow banks and other financial institutions to abuse customers, by having contracts and applications that do not disclose everything a consumer needs to know. Given that a recent study of literacy among adults in Canada shows that about one-quarter of Canadians are functionally illiterate and another quarter can only understand things that are stated in the most simple terms, again, if this loophole is not closed, then you're simply allowing financial institutions to continue to abuse Canadians.

As for the ombudsman, the power should be binding, otherwise the system will be less effective. Recommendations that banks should take into account a consumer and give them some relief after they've been abused will, we believe, be largely ignored, because the benefits of ignoring the recommendations will outweigh the costs. Any business, when the benefits of doing something outweigh the costs of not doing it, will continue to abuse customers.

As well, we believe a financial consumer organization needs to be created, using the very simple method of requiring financial institutions to mail out a one-page flyer to their customers periodically. You recommended that this be explored by Industry Canada in your December 1998 report, and so did the Senate banking committee. Industry Canada has done zip since then. This solution will cost the government nothing and cost financial institutions nothing, and it will create a place for consumers to call that is their own, run by them, directed by them, and funded only by them. It's a perfect complement to the ombudsman and the new Financial Consumer Agency.

Finally in the consumer protection area, the fines for violating financial institution laws need to be increased. A $100,000 fine for institutions whose annual revenue is about $10 billion is a meaningless fine. Once again, the benefits of non-compliance outweigh the costs of non-compliance, so banks and other financial institutions will not comply with many aspects of the law.

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Their chances of getting caught will be very slim, because even though the government is setting up the Financial Consumer Agency, it remains to be seen what resources it will have to actually watch over financial institutions.

Turning to our final area of concern in the area of mergers, takeovers, and other ownership and control issues, we are against increasing the share ownership level for large banks, because we believe it will allow a few shareholders—including foreign shareholders—effectively to control a large bank, mainly through the selection of directors and executives.

The government's assurance notwithstanding, we simply do not believe that holding up to 20% of the voting shares of any of our large banks will... We believe that it will mean effective control. We think we'll be proven correct in the future.

We do not believe holding companies should be permitted, because they will allow banks to restructure to escape regulation—the government's reassurances notwithstanding.

Finally, in terms of foreign banks moving into Canada, we believe the current barriers to foreign entries should be maintained. The WTO financial services agreement is entering negotiations again. We do not believe that the barriers to foreign entries should be lowered in any way, and that all foreign banks should be fully regulated in their operations in Canada.

With regard to bank mergers, we believe a moratorium should be enacted, not just on bank mergers but also on any takeovers of other financial institutions by banks. That moratorium should be in place until a full system—as they've had in the U.S. for over 20 years under the U.S. Community Reinvestment Act—is put in place and all takeovers and mergers are reviewed. One of the criteria that should be added to our assessment that is proposed by the government is the current business record of the financial institution.

Under the bill if someone wants to start a bank, their current business record will be reviewed. But if a bank wants to take over another company, the public interest impact assessment and the whole review criteria that are set out—not in the bill, but simply in an attachment to a press release as guidelines—do not include assessing the current business record of the bank. It doesn't make sense. If banks are serving people poorly, why would you want them to get bigger? They'll just serve more people poorly. That's the rule that's been in the States for over 20 years. If it's a bad bank, then you don't let it get bigger, because then more people will suffer abuse at the hands of that bank.

So we urge you to recommend—in the areas where you can—that regulations be strengthened. But overall we urge you to put out in the open in the bill some of these areas that are going to be dealt with by regulation behind closed doors, so it can be fully debated and reviewed by Parliament and the Canadian public.

We do not trust the Department of Finance. From what we've heard from them, they are intending to enact regulations that will contradict the minister's public statements on the intent of this bill. Those regulations will be passed behind closed doors. You will not have a chance to review them and neither will the public. This is simply continuing the abuse of over 20 million financial consumers by financial institutions, and it has to stop. It's not in the public interest, and any government with any integrity would not pass such a bill, which does not protect the public.

The Chair: Thank you.

Mrs. Barnes.

Mrs. Sue Barnes (London West, Lib.): I have a point of information, Mr. Chair. I'm a member of the scrutiny of regulations committee. It's a joint standing committee of the House of Commons and the Senate, and I have recently been added. Our sole job is to review regulations under the laws that are passed by Parliament. This is just for information purposes, Mr. Chair.

The Chair: Thank you, Mrs. Barnes.

Thank you, Mr. Conacher.

We will now hear from the Insurance Consumer's Group, Mr. William Podmore, president. Welcome.

Mr. William R. Podmore (President, Insurance Consumer's Group): Thank you.

I was looking in the Montreal Gazette of Saturday, March 3, at an article on me, “insurance crusader”. There was a comment by Dick Harris, the Canadian Alliance critic, that I would be running against the wind in this presentation. I think most Canadian financial consumers probably are running against the wind.

However, on behalf of the financial Canadian—

The Chair: That's why we have these closed rooms. There's no wind here. We're here to listen to everybody.

Mr. William Podmore: Well, there was one on the way here.

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On behalf of Canadian financial consumers I'm delighted to have the opportunity to appear here before you. In addition to comments previously provided to you on Wednesday, August 2, 2000, and to those given to the Honourable Paul Martin on November 24, 1999, I offer additional comments on Bill C-8.

For those of you who are not aware of the work that my small group and I have achieved to date, I don't have time right now to fill you in. However, should you wish to reach me, my numbers are at the top of my brief.

Our primary concern is that the financial consumer protection bandwagon, as evidenced by recent initiatives of the Canadian Life and Health Insurance Association and the Canadian Council of Insurance Regulators, in cooperation with the Insurance Commission of Ontario and most probably other organizations, will not provide Canadian consumers with the most effective, efficient, and simplest structure through which they may address their complaints and seek real assistance.

In our submission to the MacKay task force on October 10, 1997, in regard to consumer protection, we know if we add to this mix the numerous governmental and non-governmental consumer groups across the country acting in good faith for the beleaguered consumer—albeit unfocused and generally creating a counterproductive situation in which there is duplication of effort, great cost inefficiencies, and ineffective achievements—our fear is that without a clearly defined plan and strong federal motivation to harmonize both the consumer protection efforts and the supervisory role of the agency over the financial sector, the interests of Canadian consumers will not be appropriately served. Let us not have confusion within the financial sector, as well as confusion within consumer protection initiatives. Such would become an unnecessary waste of human and financial resources.

Our second concern is described in the bill's paragraphs 3(2)(a), (b), (c), and (d). The objects of the agency over which the minister shall preside and be responsible are essentially to supervise financial institutions for compliance of consumer provisions; promote adoption of consumer provisions; monitor implementation of voluntary codes of conduct; and promote consumer awareness of these provisions.

We believe these provisions are totally inadequate, and we suggest once more that the agency should be independent of government to ensure there are no seen or unseen conflicts of interest. The agency should have much greater enforcement powers. The agency should also establish an appropriate and effective system of providing Canadian financial consumers with access to no-cost, efficient, and capable legal support.

Given the complexities and length of time that may be required in order to achieve harmonization of financial services between provinces and the federal government, if it happens at all, we suggest that a national legal action group be established, initially funded through government assistance, in order to represent exclusively the legal interests of Canadian financial consumers working in close association with consumer groups of record.

One of numerous reasons for the suggestion is to ensure there continues to be capable legal counsel that will represent consumers. We have been advised that some law firms that have excelled in representing financial consumers have been contracted by financial institutions, thereby creating a conflict of interest situation and effectively eliminating consumers' access to knowledgeable, competent legal representation. Additionally, in class action litigation, plaintiffs' counsellors are not compensated until after the final judicial decision is rendered. They must bear unreasonable financial burden, carrying cases while defendants' counsel are paid on a monthly basis. This, in balance, further discourages lawyers from action for plaintiffs involved in class action lawsuits.

As our fourth concern, we also concur with the comments by Senator Leo Kolber, as reported in the Financial Post of Thursday, June 22, 2000, that the vision of this bill is inadequate and that it fails to set out a broad vision or blueprint for the unfolding financial services industry. We view the proposed legislation as essentially a bank merger blueprint rather than a blueprint for the financial services sector.

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As we see it, the proposed legislation does not adequately address the issues of full, plain, and adequate disclosure to consumers; fair, reasonable, and non-abusive transaction practices; and adequate redress mechanisms to resolve disputes. This was discussed in task force recommendation 53.

We see a major opportunity that will most probably be missed for the coordination of efforts between consumer advocacy groups, industry, and government. Task force recommendation 56 urged the creation of a financial consumers' organization. We believe such an entity with support mechanisms as described in the task force report, including a legal action network, would greatly assist the agency in its work and serve at local levels as a resource centre for consumer information and education.

In summary, we realize the vulnerability of governments to extensive lobbying efforts of financial industry interest groups whose views might not be motivated by strong concerns toward Canadian consumers or, indeed, the health of the Canadian economy. However, we believe that, through effective and meaningful consumer interest participation, we can see an industry that can prosper and enrich the lives of all Canadians and the government through fair competition and customer service.

Thank you.

The Chair: Thank you very much, Mr. Podmore.

We're now going to hear from the National Anti-Poverty Organization's assistant director, Ms. Pam Kapoor. Welcome.

Ms. Pam Kapoor (Assistant Director, National Anti-Poverty Organization): Thank you, and good morning, Mr. Chairperson and committee members. My name is Pam Kapoor. I'm with the National Anti-Poverty Organization, and although I'm into only my second week on the job, I'm very happy to be here to speak about Bill C-8.

I would like to apologize in advance for the absence of our executive director, Mr. Bruce Tate, who unfortunately got called away to a family emergency just this morning. Again, thanks for allowing us to be here.

Very briefly, the National Anti-Poverty Organization was founded in 1971, and we will be celebrating our 30-year anniversary this year. NAPO is a national, non-partisan organization that represents currently over 5 million Canadians who live on low incomes in this country. Our board is extremely representative of the Canadian fabric, and includes individuals who are currently living in poverty or who, at some point in their lives, have lived in poverty.

Among other things, NAPO represents, both with government and within the media, the concerns and the reality of low-income Canadians at the national level, especially as they relate to issues of public policy. Our ultimate goal is to see the eradication of poverty in this country.

Regarding Bill C-8, one of the major assumptions we are operating from is that access to banking services is not a luxury. Rather, it is a right. It is a necessity in our society to ensure that individuals can participate equally and fairly as members of this society. This is an issue that NAPO has been working on quite strongly for over 15 years, and it is of significant concern to us. We know that nearly 10% of families who have household incomes of less than $25,000 a year do not have a bank account.

Bill C-8 presents a tremendous opportunity to honour our obligation to respect the right to access to financial services, and, taken with recent recommendations of the Canadian Human Rights Act review panel, we can move to make significant, important, and necessary improvements in the lives of our low-income citizens.

People who do not live with low incomes take that experience for granted and generalize it to all individuals. It is not accurate, nor is it fair to do this. It is very important that we consider other realities and experiences, especially when we look at the access provisions of Bill C-8. Those are the ones we hope to address today and within the brief we have provided for you.

In terms of Bill C-8, NAPO is encouraged and recognizes that some of the provisions in the legislation go some way toward improving access for low-income individuals. For example, no deposit or minimum balance requirement to open or maintain a bank account is a step in the right direction. The commitment to establish the Financial Consumer Agency to monitor and enforce consumer interests is also significant. However, NAPO feels very strongly that the Financial Consumer Agency must be headed by a consumer advocate in order for it to be effective and credible.

As well, the provision in Bill C-8 to cash federal government cheques without the requirement that an individual hold an account is a very important and significant change.

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Now I come to some of our concerns. Regarding the cashing of federal government cheques, although it is a step in the right direction we would recommend that this be expanded to include all government cheques, including those issued at the provincial level. We do know that social assistance cheques, as an example, are issued at the provincial level. Without the same guarantees, to cash that cheque without a minimum balance being kept or a bank account would be problematic for low-income Canadians.

We know of instances where people have gone to a bank with their social assistance cheque and ID to prove who they are and been turned away, even when the provincial government cheque was drawn on the bank at which they presented themselves. They are left with their ID and their cheque in hand, and they come back with letters confirming who they are, and still the cheque isn't allowed to be cashed. It's a very significant concern to low-income Canadians, one that NAPO has been dealing with for some time now.

We are also concerned about the failure of Bill C-8 to legislate a reasonable hold period in keeping with the Canadian Payments Association clearing timelines. This is a serious gap in ensuring fair and equal access to low-income people. We know that within a province a cheque can clear almost within 24 hours. It would seem reasonable to legislate an in-province hold period of no more than two days. Without the guarantee of a legislated reasonable and fair hold period, efforts to improve access to banks for low-income people are simply not there. If you can't get access to the funds in a reasonable amount of time, you in fact do not have fair access.

With regard to low-cost accounts, the June 1999 white paper made a commitment to legislate a low-cost bank account. Bill C-8 unfortunately fails to do this. Instead, it's working with the self-regulatory approach, and will work with the banks through MOUs to implement low-cost accounts. NAPO believes that at this time we have ample evidence of the failure of self-regulatory solutions and that low-cost accounts simply must be legislated. We know that banks do not voluntarily work to ensure that the needs of low-income consumers are met. Banks perhaps do not understand the obligation and responsibility they have as chartered institutions to treat all consumers fairly, and they will not likely do so without strong legislation.

With regard to branch closures, we have concerns with the fact that they are being dealt with through regulation rather than legislation. We believe the rules concerning branch closures must be legislated before we find we don't have any branches left in low-income and rural communities. The Public Interest Advocacy Centre released a study many of you may be familiar with, which indicated that almost 50% of rural bank branches had been closed in the last 10 years in communities they serve right across Canada. This we consider to be a huge blow to financial access in non-urban areas for many low-income Canadians.

Banks have profited and continue to profit tremendously from protective legislation and regulation. They therefore have an obligation and a responsibility to provide fair and equal access to all Canadian citizens.

We are particularly concerned about the length of periods of notice for the closure of bank branches and the responsibility of banks to provide to communities where they intend to close a branch the documentation and sound rationale for the closure of that branch. If and when a bank is closing the last branch in a community, NAPO believes the bank should be required by legislation to work with that community to find a mutually acceptable alternative before that financial institution is lost and that lifeline is taken from the community.

We don't need to review together all of the problems faced by low-income Canadians with regard to transit issues and other sorts of access issues when it comes to financial institutions in their communities and neighbourhoods. Our other concerns about access are addressed in the paper we have provided for you, entitled Banking on Justice, and our recommendations are listed in the final pages of that document.

In closing, I would like to ask this committee to consider the obligation we have as a society to all of our citizens. Banking is just one example of a sector that is failing to treat low-income Canadians fairly. We look forward to your positive responses to the recommendations put forward on Bill C-8.

Thank you for allowing me to be here.

The Chair: Thank you very much, Ms. Kapoor, and congratulations on your first presentation to the finance committee. I'm sure we'll be seeking your advice on other issues as well.

Ms. Pam Kapoor: Glad to hear it.

The Chair: We'll now hear from the National Council of Women of Canada, Ruth Brown and Maria Neil. Welcome.

Ms. Maria Neil (Convenor of Economics, National Council of Women of Canada): Thank you, and good morning to everybody.

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I'm not going to read our brief aloud. You've had it for several weeks. I just want to highlight certain points that we feel are important. They are all specific items related to our policy at the National Council of Women of Canada.

We were founded in 1893. The council is a non-profit organization of women, representing a large number of citizens of diverse occupation, language, origin, and culture, and currently composed of twenty local councils across the country, five provincial councils, two study groups, and 27 nationally organized societies.

We enjoy consultative status with the Economic and Social Council of the United Nations. We are federated with the International Council of Women, which consists of 17 different national councils. By its constitution we are committed to work for the improvement and the status of women and their families, as well as for the betterment of general conditions for all members of society.

We urge the Government of Canada and financial institutions to work responsibly for the benefit of Canadian people while at the same time retaining a strong and vibrant financial sector. Specifically, National Council of Women supports equitable distribution of financial resources and a strong role for the federal government in financial matters. We note that in many places in Bill C-8 detailed rules will not be known until after the bill has become law and the regulations have been written.

We commend the government on measures for additions to the requirement for disclosure of information, particularly by foreign banks trading in Canada. On the other hand, we are concerned that the regulations for bank mergers still do not go far enough. The minister personally reserves the final discretionary power to accept or dismiss any proposed merger. As well, we found numerous instances where the Governor in Council is permitted to create exemptions.

In short, there remains considerable leeway for financial entities to acquire similar institutions, to be acquired, or to amalgamate. The Canadian public has clearly shown its distaste for such occurrences, knowing the danger that large banks would pose should they get into financial trouble. As the task force pointed out, Canada already has a concentrated banking sector. We recommend that the government permit no further mergers between large banks.

We recommend that the government retain the boundaries between banks and those companies selling securities and insurance. National Council agreed with the task force about the importance of retaining the rule that no individual can own more than 10% of any class of shares in a bank. Yet we see that the proposal in Bill C-8 is to raise that percentage to 20% for the purpose of voting.

We recommend that the government retain the rule that no person may own or vote on more than 10% of any class of shares. In seven sections the words “significant interest in a class of shares” and “major shareholder” occur frequently. We recommend that these phrases be more clearly defined.

National Council of Women has asked for disclosure of profit and loss records by financial institutions regarding the costs of doing business and how bank charges are calculated. For instance, we would like to see a demographic analysis by neighbourhood of loan applications and how they were treated, and the rate of default among large borrowers, given that small businesses, particularly women's, find it so hard to get loans. A community reinvestment act similar to the one in the U.S. would hold banks accountable by requiring disclosure of these items of information. We note that the recommendation by the task force for the creation of such an act has been largely ignored. In Bill C-8 we can find only a requirement to report on a national level.

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Our members acknowledge that most financial institutions are privately owned and that shareholders expect to make a profit. In order to be legitimate in the eyes of the public, these institutions must ensure ethical practices and be financially viable, as well as perform as good corporate citizens. They must gain and retain the public's confidence in order to conduct business and should contribute to the well-being of their communities by providing accessible and affordable banking services and by investing time and resources in projects of their local communities. By these actions they contribute to a more equitable growth, thus helping remove some of the disparity between rich and poor.

National Council supports the principle of granting loans based on sound business practices. Nevertheless, we have advocated an equitable lending policy that benefits small borrowers, low-income Canadians, women, people undertaking projects designed to benefit local communities, and people with ideas about innovative technologies.

A bank intending to close a branch must give notice and hold a meeting with interested parties in the vicinity. That's on page 79 of Bill C-8. Now, we note with dissatisfaction the fact that there are circumstances in which this is not required at all, and furthermore Bill C-8 contains no requirement for supplying information of profit and loss.

We also note that there is no provision in Bill C-8 for dealing with excessive credit card interest rates. Moreover, bank tellers will still be able to arbitrarily reject account applicants.

Now my colleague is going to deal with the financial consumer agency.

Ms. Ruth Brown (Convenor of Health and Welfare, National Council of Women of Canada): I have just a few words about the Financial Consumer Agency of Canada.

First, National Council commends the minister for proposing the establishment of the agency and the office of commissioner. Consumers often feel powerless when dealing with large financial institutions. National Council has been concerned about the lack of responsiveness to consumer concerns on the part of financial institutions and has favoured the creation of an agency independent of financial institutions for the regulation of compliance. We've also asked the government to assist in the creation of a financial consumers' organization.

We hope that the new Financial Consumer Agency will protect the interests of the consumer. Some of the recommendations we think are important are the requirements that the commissioner promote consumer awareness of the obligations of the financial institutions; that there be policies and procedures to implement consumer provisions and a means of ensuring compliance; that there be procedures for dealing with complaints; that there be monitoring of the implementation of any voluntary codes of conduct—though we wonder how effective voluntary codes in fact are—and of any public commitments made by the financial institutions designed to protect the interests of customers; and finally that the agency report to the minister on a regular basis. We believe these reports should be made public. That's our fifth recommendation.

Sixth, we recommend clarification and an increase in the recommended fines for violations.

I'll turn it back to you, Maria.

Ms. Maria Neil: Thank you.

In view of the very large profits enjoyed by banks, which further lowers the level of public confidence in banks, we're concerned about the vague nature of the concept of obtaining a reasonable return. This concept is noted in several places, particularly proposed section 465. We recommend that the new act more clearly define “reasonable return”. It's much too loose as it stands now.

Members of National Council believe strongly in the need to make financial institutions accountable. In past presentations we have suggested that consumers sit on boards of directors of the various financial institutions, and this is a strong recommendation of National Council of Women.

Of prime importance to our members is gender equality, and we recommend that financial institutions be required to report the results of a gender analysis of the policies and strategies of the human resources departments within the banks and financial institutions.

Thank you. That's the end of our formal presentation this morning.

The Chair: Thank you very much, Ms. Brown and Ms. Neil.

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We'll now proceed to a question and answer session, beginning the ten-minute round with Mr. Epp.

Mr. Ken Epp (Elk Island, CA): Thank you very much.

Thank you all for being here today and for enlightening us with respect to your viewpoints. I always take copious notes when we have presenters, and I have a number of questions, which I have identified for you here.

You see, that's preamble talk while I arrange my paper. I'm like the slick politician giving a speech who said “Before I say anything, let me talk for awhile”.

The Chair: Your time's running out.

Mr. Ken Epp: Right, 29 seconds are gone.

First of all, Mr. Conacher, I have a few questions with respect to your presentation. I guess all of you drew attention to this problem of the clearing time. What you're doing here, all of you today, is acting as advocates for people who are in the lower income bracket. I think that's generally where you're all coming from.

These people come to a bank, they have a cheque, and they want to cash it. They're not permitted to get the money for it. There are all sorts of hurdles for them to jump over, and you're all suggesting that the holding time on cheques should be reduced.

Government cheques, for example, should be cleared right away, and why not? Here's a person with a government cheque, so let them just get the cash for it. But how do you propose that banks should then protect the very people the cheques are written out to in the event that those cheques have been stolen or misplaced? That does happen. Somebody might well get a cheque that doesn't belong to them out of somebody's mailbox and then just show up and say “Here's a government cheque. I'm entitled to immediate cash.”

How would you address that particular problem? I think it is a problem the banks are trying to address by having the hold so they know the right person got the cheque—or am I completely wrong there? Just correct me on that. Teach me.

Mr. Duff Conacher: If that's what the banks have told you, that this is the reason for the hold, then I'm sorry it's—

Mr. Ken Epp: Okay, then, what is the reason?

Mr. Duff Conacher: As far as we can tell, based on the survey that we did of 103 branches of seven financial institutions across the country, the hold is an arbitrary measure to discourage people with low incomes from opening accounts. We know this because that's how it was applied when people walked into a branch and said “I want to open an account. What are the requirements?” The branches that violated the voluntary code on access by asking people whether they were employed or asking them to keep a minimum balance, which was against all the voluntary codes signed in February 1997, are the same branches that also said “We'll put a 30-day hold on your first cheque or on every cheque for the first six months”. That's the reason for the hold.

In the U.S.A. they have a law that has existed for a number of years. It gives customers a right to go the next day and get a certain amount of what they've deposited. It also has set time limits for when they have the right to the full amount, based on whether the cheque is from the same bank, whether it's from out of state, or whether it's drawn on a credit union and cashed in a bank, in which case it takes a bit longer to clear.

There's absolutely no reason why this can't be put into law here. It's been in U.S. law for several years, so we are very suspicious that the reason it's not in the law is that the government is protecting the banks. It allows the banks to continue to abuse customers by only requiring the banks to explain their funds-holding policies and not requiring them to give people access to funds as soon as they're cleared.

Mr. Ken Epp: Okay.

Mr. Duff Conacher: Whether it's cleared in two days or ten days is not going to protect someone whose cheque is stolen, because in any case they don't know which bank to go to to find out where it's been deposited. How do they know whether it's been deposited, cleared, or sent somewhere else? The delay is not going to protect people whose cheques are stolen.

Mr. Ken Epp: I'm not here to argue with you on this, but it seems to me that if after 10 days the person hasn't received his cheque, he's going to make a phone call and ask whoever it was in the government who was to send him the cheque where it is. Then it can be traced. I think that's the reason, but I may be wrong, and I accept your explanation and your perception of it.

• 1025

Do the other witnesses have anything to add to this question?

Ms. Pam Kapoor: Yes, I do, although I won't add to the specifics that Duff outlined regarding the holding period. We feel the same way. Certainly, if an elimination of the holding period is impossible, we're asking for a reasonable holding period. There's no need for a ten-day or more holding period. Perhaps two or one would suffice.

We also do agree that acceptable forms of identification should be required by all banks. We are asking for an expansion of what those acceptable forms of ID might be. As it stands right now, there are merely three or four that any banking institution would find acceptable. We do not understand why that list may not be broadened to include, for example, health cards, voter registration identification that has been sent by the government, utility bills, and student cards. Other forms of acceptable identification may be added to that list to address the protection issues that you've outlined in your question.

Mr. Ken Epp: This may interest you, and I would just like your reaction. In Alberta you can get a driver's licence that does not permit you to drive any vehicle. You can walk into an issuing agency and say that you need a picture ID just for identification purposes. It gives your address, name, date of birth, and picture. It's all laminated so that it can't be easily altered.

Would you object if the people you represent were required to walk into an office and get such an ID, which they then must present in order to cash a cheque? Then if they have a government cheque together with that ID, they would get their money right way. Would that be an acceptable compromise?

Ms. Pam Kapoor: I would not object as long as that particular form of ID was part and parcel of a very lengthy list of acceptable forms of identification, and as long as the administration of such an identification card was widely accessible and available to all people, not just available in several urban centres or an out of the way location. If we're hoping to regulate that all citizens carry this particular form of identification, we had best be assured that it's easily accessed by all Canadians.

Mr. Ken Epp: Yes, that's reasonable.

Mr. Duff Conacher: I would just add one other thing, which is a question to you. Have the banks provided you with any real, concrete evidence of a significant problem with welfare cheque fraud?

Mr. Ken Epp: No, no.

Mr. Duff Conacher: Right. So what problem are you addressing? It's just more bubbles blown in the faces of you, as policy-makers, by the banks. It's not unusual. They lie all the time. And in this case, they've lied to you again if they're saying there's a serious problem.

Mr. Ken Epp: Yes. I will tell you very frankly, I have never been, I suppose, in the... Well, I guess I have for a number of years. Before I got my first job, I was in that group we would call “those who are not very rich”. On a number of occasions since I've had a full-time professional job, I've had a bank refuse to cash my cheque because I didn't have an account there.

Now, I accept that. That's their policy. I have an account somewhere else. When I walk in and want cash, they say, “Sorry, our policy is not to give that. Do you have anything else that can connect you to our bank?” They have that policy. Well, I may have to walk across the street to a different branch because I have a different connection.

I really think we need to address your question. It is very legitimate. We've heard it a lot, and we need to address it. I think we need to probably work together. I'm not sure that a regulation such as that should appear in Bill C-8, but I think there should be some policies developed together with the banks and perhaps with the regulatory part of this bill. I would urge you that if this doesn't happen...

Mrs. Barnes told you that she was on the scrutiny of regulations committee. Presuming Bill C-8 is passed and comes into force, if after a reasonable time these problems are not properly addressed, or if they're improperly addressed in the regulations, I hope that you will communicate with Mrs. Barnes and others who are on that committee. It's a no-stamp issue. You can write a free letter and bingo—let's get after this thing. I agree with you.

I have another question. I think most of you said there should be no more mergers, period. Big is bad and foreign is bad. I thought of a comparable example, and I would like your reaction.

• 1030

In many communities across the country, including my own, a lot of our little stores that used to sell clothing, jewellery, and hardware have been eaten up by the big stores. A big Canadian Tire came into my community about fifteen years ago and really made it tough for some of these little guys who had been in business for a long time. Eventually, they went out of business.

Wal-Mart is a big American firm, yet I find that people from all walks of life, the rich and the poor alike, walk into those stores because they get comparable goods for lower prices. Now, in advocating for the people in the lower level of the economic bracket, why would you be opposed to steps that might—I'm not saying they will, but they might—actually reduce cost to the consumer? They certainly did in these cases like the Wal-Mart example, which became the store of choice for some consumers because things are cheaper there. I want your reaction to that.

Mr. Duff Conacher: Every study that has been done has shown there are no economies of scale, no cost savings, when a bank is above $5 billion in its overall capitalization. All of our big banks are above $5 billion, so there will be no cost savings. In fact, as we're seeing with the Toronto-Dominion Bank taking over Canada Trust, most of those customers are going to face increased service charges.

We have that one made-in-Canada example that's recent and, as an aside, never should have been approved, because the current business record of both TD Bank and Canada Trust shows abuse of customers. At the very least, corrective action should have been required as part of the approval of that takeover. But in that case, the service charges of most of the customers of this newly merged entity are increasing. So much for the theory that big is better and will result in lower prices. Our banks have already realized all the economies of scale that they can.

Beyond that, what we're concerned about is letting our banks get bigger without forcing them to prove that service will improve. That's the system the government has now. Our banks are taking over all sorts of financial institutions, mostly now in the insurance area because they've already taken over almost everything else, and the government is closing its eyes entirely to this. It's letting them get bigger without ensuring that service improves. For twenty years, the U.S. has required banks to prove service will be better before they are allowed to get bigger. I mean, it just makes sense. It's common sense. That's why the U.S., the heart of capitalism, has done it for over twenty years.

That is why this bill does not protect the public interest. Any government with integrity would not pass it in its current form, and certainly would not claim it's going to protect consumers from abuse and improve service.

The Chair: Thank you, Mr. Conacher.

Ms. Neil, I think you have a comment.

Ms. Maria Neil: Mr. Conacher was talking about the relationship between growth of the banks and service. If you then extrapolate that to the buzzword of globalization and you think of service in particular, and then you throw in Wal-Mart, which Mr. Epp mentioned, Wal-Mart has the worst employment records around the world. Globalization has made it possible for them to bring in the most awful working conditions, and they, along with some other sports manufacturers, are the worst. Do we want to see those sorts of conditions in the labour market for Canadian financial institutions? I think not.

If Mr. Conacher is right—and I believe he is—that the relationship between growth and service is not necessarily positive for service, then we need to think again about growth and mergers.

Mr. Ken Epp: Can I just give about a thirty-second rebuttal here?

The Chair: It'll be thirty seconds.

Mr. Ken Epp: Yes, I'll quit right away.

With respect to Wal-Mart and their employment record, it's interesting. We have a relatively new Wal-Mart in my community. It's a couple of years old now. I walk in there quite often because there are a lot of people in there and I like talking to them. I also talk to the employees. Not very long ago, I was talking to three of them in a little group. I asked how they liked their job there, and they said they loved it, that it was fun working there. But that's anecdotal, so...

Ms. Maria Neil: I'm talking about the foreign labour conditions.

• 1035

Mr. Ken Epp: Okay.

With respect to mergers of banks, I'm thinking of a number of small communities in my area where there have been little branches of each of the different banks. Those branches are basically uneconomical, so they're all saying they're going to pull them out. If we allowed a merger, then maybe they could combine their businesses from two or three of these little branches into one and keep a branch open in the local community. But that's another thing.

The Chair: That's his final word.

Mr. Ken Epp: That's my final word, but I'd like to come back in the second round if there's time, Mr. Chairman.

The Chair: You've had your first and second, because you had fifteen minutes.

Mr. Ken Epp: Holy cow.

The Chair: Before I go to Ms. Barnes, I just want to piggyback on one of Mr. Epp's questions.

In reference to foreign banks, Mr. Conacher, you seem to have a concern about foreign entry. I'm just wondering how you feel about Canadian financial institutions making money abroad. Should the countries in which we're making money put up barriers for our companies?

Mr. Duff Conacher: First of all, you're assuming we're making money in those countries, and that's one of our—

The Chair: A large portion of financial institution money is in fact made from revenues that we generate abroad.

Mr. Duff Conacher: Yes, but not necessarily—

The Chair: It's 50%.

Mr. Duff Conacher: —in all countries. One of the reasons for this is that banks, unlike other companies, do not have to disclose their profit and loss record on a country-by-country basis. This is one of the recommendations that we've made, both to OSFI and to the chartered accountants. The rules should be changed to the D-1 guideline that the superintendent currently has.

For example, a few years ago, Scotiabank lost tons of money in Mexico. With the D-1 guideline in place, people could know if the fact that Scotiabank had the highest service charges of any Canadian bank at the time was in any way related to the losses in Mexico. Were they gouging Canadians here at home in order to subsidize their losses abroad?

The Chair: But in aggregate terms, you have to say a large part of the revenue is in fact generated abroad.

Mr. Duff Conacher: Yes, that's fine, but that's aggregate. We want to know the country-by-country breakdown.

The Chair: Do you think that's really important?

Mr. Duff Conacher: It is important to know, yes. Are our banks gouging us here at home in order to subsidize losses in some of the countries in which they're operating overseas?

The Chair: So you think they're losing money abroad.

Mr. Duff Conacher: Nobody knows. Again, it's just another area with a lack of transparency. You don't know on a country-by-country basis—as is required of other corporations—the disclosure of the banks' profit and loss record. It's all reported just as foreign.

Beyond that, in terms of the barriers, we believe the barriers should be maintained because we believe our banking sector is very key to the overall economic sovereignty of the country. Given the fact that we have so few large banks, a takeover by or merger with a foreign bank in Canada, or a foreign bank coming in and being able to partner with our banks through a holding company structure, would give a large share of the market to foreign control. That is unlike what's happening in the U.S., where our banks are going in but are in no way taking away a significant portion of the market share.

The banking system in the U.S. remains in U.S. hands, largely. If any one of our banks tried to take over something like Citibank, you had better believe the walls would go up in the U.S. as well. It would be the same for any of the banks with any significant market share.

The Chair: What's the likelihood of a Canadian bank taking over Citibank?

Mr. Duff Conacher: Well, it's not very likely, but I'm just saying that as a hypothetical scenario. The U.S. is fine with foreign banks coming in because they don't possess a significant market share. In Canada, we have to maintain the barriers. We have so many fewer banks that if we allow one of our banks to be taken over in any way or if we even allow effective control of one of our banks, a large part of the market is suddenly in foreign hands. We do not think that's in the public interest, and we know the Department of Finance and the minister do not think it's in the public interest either, based on the proposal for this next round of the WTO.

The Chair: Okay.

Ms. Barnes, followed by Mr. Pillitteri.

Mrs. Sue Barnes: How many minutes?

The Chair: You have fifteen minutes.

Mrs. Sue Barnes: You're generous today. Thank you.

The Chair: Ten minutes—just kidding.

Mrs. Sue Barnes: He's already taking it away.

I thank you very much for your presentations. You know, I think we have a bill that primarily has two goals. One is increased consumer protection, and the other is helping to maintain and establish an even more vital Canadian financial services sector in this country. I think consumer protection and the other goal should complement each other.

• 1040

I know there have been failings in the past, especially at low-income-Canadian levels. Even though I hear your complaints, and I see and agree with the validity of those complaints in some areas, I would like there to be some acknowledgement that this bill does go further. There are some good things happening in this bill that didn't happen before. Maybe I'll take you through a few of those.

Let's talk about opening accounts. Before, I think it was routine that we'd ask for a couple of picture IDs. The picture ID is not necessary right now, as I understand it. It will be two pieces of ID. For instance, a social insurance number will be one of the most likely acceptable pieces of ID, and I would propose that there be submissions from some of you to suggest other pieces of ID that would be readily available and acceptable.

I would like to say, too, that this bill does allow that if people do not have the two pieces of ID, then a person who's known to the bank can also introduce, in a sense, and verify who is this person who wishes to open an account. That is also allowed.

That is the information I have from the finance department on that, and it is right in my printed materials on this. I just want to state that.

I want to pursue the points you raised about other levels of government, with their own government cheques. We have indemnification agreements at the federal level. These are missing with some of the provinces and the municipalities, and I think a pursuit of that avenue would rectify in the same manner in which we are now moving forward at the federal level. So I think that is a positive step forward.

Ms. Neil, you raised a concern about, in a sense, the political involvement, the discretion of the minister at the end of the road on so many of these decision-making processes. You raised that as a concern for you as opposed to a protection of the consumer. I've heard the reverse argument from the financial sector, the financial institutions, saying there is not certainty. There should be guidelines. There should be steps—A, B, C—and if we meet these, it's a closed, done deal. The political interference, or the right of the minister, or however you want to frame that, should not enter into it.

I want to raise with all of you the possibility that the minister's absolute discretion at the end of the day, after going through, say, a guideline merger process, is potentially another consumer protection vehicle, because it does have the input or the influence of the public through their elected officials, and perhaps the flexibility to meet changing conditions. Whatever we put into effect today, three or four years from now could be a little different circumstance, perhaps something not envisioned by circumstances in the community or the public, or perhaps in the globe.

I'd like you to expand on that for me.

Ms. Maria Neil: Taking your point in regard to identification for opening an account, I don't have particular solutions to that, but I would warn against having a general identification for everybody. This was suggested at the Ontario provincial government level some years ago, and it was shot down in flames by the public as being a form of social control.

If it's as Mr. Epp suggested, a voluntary request for a driving licence, without wanting to drive, as identification, it makes some sense, but I do worry about having a general identification card for everybody. Of course, the new health cards in Ontario, particularly, do have a photograph on them, so that might help a little as another means of identification. But as a form of social control and labelling everybody, I would strongly vote against that.

In terms of the minister's discretion in various places in Bill C-8, one of the things we are concerned about is the access to the minister by financial corporations, by large corporations. There is so much in the press and in general knowledge now about domination of governments by corporations. If the minister is accessible by corporations more easily than by the likes of non-government organizations, if he is influenced more by that means, then I think that's a danger and we should guard against that.

• 1045

So we'd like to see some greater clarification of the minister's role in this matter.

Mrs. Sue Barnes: I think the minister's role is pretty clear. He has discretion at the end of the day. I would submit to you that the representatives around this table all have access to the minister, and we're pretty good representatives of the grassroots in our community. We've made that known, and we have a history of making it known.

So I don't think our track record is that bad with being able to have access, though I'd agree that not everybody on the street is going to be able to have immediate access to the minister.

Ms. Maria Neil: Sure.

Mrs. Sue Barnes: That's realistic.

I agree with you totally on the clearance on government cheques. I see no reason that it should be up to a 10-day period. I think that's a valid point, and maybe by airing it here, people will hear that concern and the concurrence in that concern. I know I wouldn't be very happy if I had to wait 10 days for my finances to clear. With the indemnifications in place by the federal level of government, hopefully that will change over time.

I also concur that there has been historical resistance on the part of some of the banks to having low-cost accounts. I can remember very clearly having a meeting at the beginning of the time period where we had bank ombudspeople, and meeting with one of them from one of the six large banks in my home town of London. In the course of our conversation we agreed to disagree on the need to have access for everybody to low-cost bank accounts. I'm sure that particular ombudsperson has since seen the light, and if not, we have an act that will help in that. So I think we have started on those steps.

I realize that your job here today—and it's a very important job—is to push the envelope even further. I think there are things in this bill that will assist, and to the extent that any regulation can be nailed down, I think we will try to do that, because the sole purpose of the scrutiny of regulations committee is to make sure that the regulations do not circumvent the will of Parliament as enacted in the legislation.

I'm new to that committee. It seems to be populated by a number of lawyers also. I am one, so I can't say negative things about them.

The Chair: That's not always a bad thing.

Mrs. Sue Barnes: Not always bad.

There's a good cross-section there, but there are four full-time lawyers on that committee to work on that aspect, serving to make sure specifically that the will of Parliament is not circumvented through the back door when the front door has been set in a certain direction.

So I hear your concerns, and I'm sure I and other members, over time, will try to do our best to work on that aspect.

Mr. Podmore, I don't have anything directly for you. Thank you for your presentation.

Mr. William Podmore: I have a short question.

Out of the witnesses who have so far appeared before you, could you give me an idea of how many have called for a financial consumers' organization or some other equal organization?

The Chair: You can't have the precise number, but there's general accord for an ombudsman's office, that's for sure. That has widespread support.

Mr. William Podmore: Okay, but not for a financial consumers' organization?

The Chair: No.

Mrs. Sue Barnes: I think at least one witness has called for an outside organization independent of the banks—

The Chair: Yes.

Mrs. Sue Barnes: It was this week, in fact.

Mr. William Podmore: Okay. Other than the few of us here today who have mentioned that particular organization, there have not been any other witnesses calling for the same?

The Chair: Not that I—

Mrs. Sue Barnes: No.

Mr. William Podmore: Okay. Thank you.

The Chair: Mr. Pillitteri, do you have a question?

Mr. Gary Pillitteri (Niagara Falls, Lib.): Thank you very much. I always come up with a question, Mr. Chairman, no problem there.

• 1050

I apologize for being late this morning. I did not hear any of the presentations. As an overall question, is any one group against Bill C-8, per se, and if so, what is the reason for that?

Two, Mr. Conacher, can we be more precise on the question of mergers? I think at the meeting here last time we did not have any legislation in place for mergers, and I think this bill addresses the issue. Why would you be against mergers? Do you think that free enterprise is dead in Canada? Don't you think there would be people lined up, ready, if we made it easier to open banks?

Maybe what the large five or seven do not want to deal with today the others that are coming on stream would want to deal with—that is, they're happy to get in the game of banking. Do you think that Canadian entrepreneurship is totally dead and has become stagnant, that there's no vision of tomorrow among other individuals who want to get into business and banking?

I think, given the opportunity and if I had enough money, I would be more than happy to get into banking. Maybe the banks today don't like to carry the account of someone who has $100 to deposit, but maybe the new one is more than happy to carry that account. I just want your opinion on that.

Mr. Duff Conacher: We are not against the provisions and processes for start-up. That's not related at all to our positions on mergers. What we're talking about is allowing our big banks to get bigger without any public review of their current business record.

When you say the bill deals with mergers—no, there's nothing in the bill about mergers. The merger guidelines are attached to a press release of February 7 for Bill C-8, and will likely only apply once. Beyond that, I don't believe even a single merger will get over the hurdles of the Competition Bureau, if the bureau does its work honestly.

Those are only guidelines. Those guidelines do not say that one of the criteria that will be assessed by the finance committee, the Senate banking committee, and the minister is the current business record of the bank. As well, those guidelines apply only to a bank taking over another bank, not to a bank taking over any other financial institution. In the U.S. they review the current business record, and they review every takeover of every financial institution. They will be reviewing the takeover by Harris Bank, which is a subsidiary of the Bank of Montreal, of another bank, and they will actually review the Bank of Montreal's record in Canada as part of that process. That's how far the U.S. law extends. In the same way they reviewed TD Bank's record in Canada when it was taking over Waterhouse in New York.

That's what's missing from that whole review process. If you do not know—and you won't know without more disclosure—the current record of service, lending, and investment of the banks, and you do not review that current record, and you let a bank take over any other financial institution and get bigger, you can very easily be allowing a bank that abuses its customers regularly to take over another financial institution that serves people very well. Which way do you think the services are going to go? We're seeing already in TD Bank and Canada Trust that the service levels are going down to TD's level. Service charges are going up overall. According to the Minister of Finance, that's in the public interest. We disagree, and so do 20 million financial consumers in Canada.

So that's what we're against.

The Chair: Thank you, Mr. Pillitteri.

Mr. Nystrom.

Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP): I wanted to ask a couple of very quick questions to Mr. Conacher, or anyone else.

With regard to the establishment of the office of the ombudsman for banking, some people suggested it should be an ombudsman for all financial institutions. Others say the credit unions don't want to be included in that. What advice do you have for the committee on that particular issue?

Mr. Duff Conacher: The difficulty is the split in jurisdiction, with provincial regulation generally covering the credit unions—and even some small trust companies face provincial regulations. So there's only so much that the federal government can do directly.

Mr. Lorne Nystrom: What about insurance companies? Sun Life suggested that it should cover both banks and insurance companies.

• 1055

Mr. Duff Conacher: Yes, we believe it should. The insurance companies say, “Well, we now have our own third-party arbitration system”, and the bill allows them to just participate in that and doesn't force them to come under the ombudsman system. We think it should cover all, because the system that the insurance companies now have is like what the banks have currently. It's run, directed, funded by them, controlled by them, and therefore lacks the independence that's necessary to impartially and fairly hear consumer complaints. So all federally regulated financial institutions should be required to—

Mr. Lorne Nystrom: Have an ombudsman.

Mr. Duff Conacher: Yes.

Mr. Lorne Nystrom: Secondly, maybe to Ms. Kapoor, do you have any studies of how under-represented banks or credit unions are in low-income areas? I know in the city centre in Regina there tends to be fewer branches of financial institutions than there are in more middle-class areas. Of course, there is more money in more middle-class areas as well.

How under-represented are the financial institutions in city centres, the poor areas, the poor rural areas, and so on? Of course, in the rural areas we have the problem of geography as well, the distance between one town and the other town.

We all know it is a problem. I just wonder if you have any data that might be helpful to us in terms of putting more pressure on financial institutions or on the Department of Finance to maybe to bring up some of the amendments we're talking about.

Ms. Pam Kapoor: I don't have the details of this study here, but Mr. Conacher has just reminded me that, as I mentioned in the presentation, the Public Interest Advocacy Centre study regarding the urban-rural banking question, which has been released, goes into some detail about some of the questions you have raised. Just today I mentioned the PIAC study's reference to closures in rural settings, and 50% of the Royal Bank branches that have been closed have been rural in the last 10 years. I think that study will be helpful.

Mr. Duff Conacher: As well, there is a group in Montreal called Option consommateurs, which used to be ACEF-Centre. I'm sure they made a submission, and if they haven't actually appeared in this round I'm sure they appeared on Bill C-38.

Mr. Lorne Nystrom: I remember that.

Mr. Duff Conacher: When they were ACEF-Centre back in 1995 they did a study. They looked at the Canadian Payments Association and went back 20 years and tracked branch closures. Invariably branch closures were in low-income, disadvantaged neighbourhoods. They studied all the Canadian Payments Association records of locations of branches for over a 20-year period so that the pattern became very clear.

It makes sense from the banks' perspective but from Canadians' perspective every single poll has shown that Canadians believe that banking is an essential service. So like utilities, which are required to serve people fairly and well and charge justifiable prices because they are providing essential services like heat, water and electricity, we believe banks should be regulated to that same extent, as do Canadians as well. The MacKay task force did a poll and the poll concluded that Canadians agreed that the banks should be regulated at a much stricter and more comprehensive level than other corporations because they are providing an essential service.

Just as an aside, the MacKay task force found that 44% of Canadians believe that bankers are heartless, so I think that might be part of the reason why they feel that strong regulation is needed to ensure that banks serve people fairly and well.

Mr. Lorne Nystrom: There was recently a memorandum of understanding between the federal government and the chartered banks and the banks agreed to provide low-cost lifeline accounts. Are you satisfied with that arrangement of the provision of low cost, lifeline accounts as a result of the memorandum of understanding? Do you have any data that you can give us on that one?

Mr. Duff Conacher: I would just say, again, if you don't have key elements, all of them, in place when you are regulating large corporations—and that is clear rules and an enforcement agency that has the resources to enforce the rules, high penalties, disclosure to track the problems—then you are not regulating the corporation. There's much we don't know about these memoranda of understanding. We don't know if there is a penalty for breaking the memoranda of understanding. Who will be doing the inspection for compliance? Will there be any inspection for compliance? What will the penalty be? Will it be meaningful to financial institutions, especially the banks?

That's why we don't like this particular vehicle. If it were in the law it would create a clear right for it, and if the penalties were increased then it would create a clear incentive to actually make these accounts available.

Yes, there are some steps taken, but essentially you can imagine the Canadian financial consumer and businesses, especially small businesses in communities, as someone drowning 20 feet offshore while this bill throws a lifeline 10 feet out. Yes, there are some steps forward. It goes halfway, but it doesn't really regulate the banks and the other financial institutions and ensure that they serve people fairly and well, and they will continue to abuse people as a result.

• 1100

The Chair: Ms. Kapoor.

Ms. Pam Kapoor: I'll be very brief. I wanted to remind the committee that as yet the characteristics that would define what a low-cost account is have yet to be established, and we would recommend that groups such as ourselves and others represented in some of your witness hearings be involved in that definition.

As I stated earlier, the National Anti-Poverty Organization has been spending upwards of 15 years on some of these very issues. That expertise would be valuable in establishing what the characteristics of a low-cost account are.

The Chair: Ms. Neil.

Ms. Maria Neil: These last few points, I think, really show the difficult relationship between profits and what we, as well as the other people here, have mentioned about community investment, that there's a control almost by the banks to rid themselves of any area of banking that doesn't make large profits.

Our request to each bank for community investment locally is the very opposite of what they're doing so often. They do show themselves only to be interested in the amount of profit they can make and not in any investment in the local community, and I think this is again another form of social control where they need so many pieces of identification or will refuse to open accounts for low-income people. It just shouts out that they are not interested in anywhere other than a better-off, higher-income community for a bank.

The Chair: Thank you.

Any further comments?

One question, Dr. Bennett.

Ms. Carolyn Bennett (St. Paul's, Lib.): Thank you.

Mr. Conacher, you used a figure of 20 million. Where does that come from?

Mr. Duff Conacher: It's an estimate based on what the banks claim as their customer base and overall levels of adult Canadians, assuming that most of those people—

Ms. Carolyn Bennett: But when you were saying, sir, 20 million were abused, is that what you feel is there in terms of a low-income cut-off or is that just saying all of their customers are abused?

Mr. Duff Conacher: I would say this is based on looking at the service level for most of the customers. And I wasn't saying 20 million are abused. I am saying 20 million customers agree that banks should be regulated to ensure that they serve people fairly and well.

Ms. Carolyn Bennett: Okay.

In a financial consumer organization, in the style you described, which would be—

Mr. Duff Conacher: Bank statement, credit card.

Ms. Carolyn Bennett: —in the bank statement there's an application form, are you saying an executive, in a model in which they would then elect their representatives to fit the various...

Mr. Duff Conacher: Yes. We set out the model in detail in our fourth position paper dating back to December 1997, which was endorsed by the MacKay task force and also by this committee and the Senate banking committee. It's the only recommendation of the MacKay task force that the minister has said absolutely nothing about, has not rejected, has not commented on in any way. In this model the flyer would go out, people would join.

We did a survey with other consumer groups in December 1996 and it showed that people were willing to pay $20 to $30 as a membership fee, and it showed that a majority of Canadians wanted the government to require not only banks but every single industry sector to enclose such flyers to create watchdog groups. What we want to do is have an arrangement whereby—as they have in some of the states where this has been used to set up watchdog groups for utilities—on a riding by riding basis using the federal ridings, if there were more than 100 members of the group in the riding, then that riding would elect a delegate and the delegate would come to an assembly every couple of years and from amongst the delegates we'd elect a board.

So we'd be democratically structured, funded by consumers, run by consumers and only there to serve consumer interests. And it would balance the marketplace. In fact, it would change the marketplace, because it would give consumers a place to call their own. If they were going before the ombudsman or the Financial Consumer Agency with a complaint, it would also give them a place to call where there would be lawyers on staff to help them with their presentations.

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Ms. Carolyn Bennett: Do you think the $20 to $30 membership fee perhaps excludes the people Ms. Kapoor represents?

Mr. Duff Conacher: According to the model we set out, there should also be a separate low-income fee. We didn't see any need for an administrative screen. We trust that if they can afford it, Canadians would pay the $20 to $30. Only if they couldn't afford it would they pay the lower fee. We're not worried about free riders. We're not worried about people possibly paying the lower fee even though they could afford the higher.

With not a very large percentage of responses, you would create a group with a lot of resources. With only a 3% response rate, the group would have 600,000 members. With the $20 to $30 membership fee, it would have a $12 million to $18 million annual budget. Ask any of us and we can tell you, our budget isn't in the six, seven figures—you know it isn't. But these people sitting behind us have those budgets.

The rumours were that the four banks wanting to merge spent $30 million to $100 million pushing those mergers. Of course that's not information they're required to disclose, so we don't know for sure, but $30 million to $100 million is not a figure any consumer group can match. That imbalance in policy-making is not in the public interest. Nor is it in the public interest to have consumers on their own when they go before a government ombudsman or agency, let alone try to deal with a bank.

Believe me, I get calls all the time from people who have been in court for eight years with a bank—and the bank just motions them to death. There is currently no access to justice for someone who has been mistreated by a bank and who is not wealthy, and I don't think there will be in the future.

The Chair: Thank you, Mr. Conacher.

Thank you, Dr. Bennett.

Do you have a final comment, Mr. Epp?

Mr. Ken Epp: I want to ask you a quick question with respect to consumer protection. We have the ombudsman, we have the Financial Consumer Agency of Canada. Would you feel more comfortable if the ombudsman did not have his or her salary paid by the banks? Should it rather come from the government, or directly from you people? What's your reaction to that?

Mr. Duff Conacher: We don't have any problem with that as long as the banks are required to fund the ombudsman. Currently the ombudsman system is voluntary. So the ombudsman actually... Well, we don't think he's been doing a very good job. You're going to hear from him very soon, and he'll disagree. But if he did a good job and really held the banks accountable, then they could cut off his resources—just cut him right off at the knees, along with his ability to actually serve consumers.

Mr. Ken Epp: But Bill C-8 provides the same thing. Would that not happen?

Mr. Duff Conacher: Bill C-8 provides that the ombudsman is required to be funded by the banks and other—

Mr. Ken Epp: Yes, he's required to be paid by the banks.

Mr. Duff Conacher: But they're required to fund it, it's not voluntary any more.

Mr. Ken Epp: In other words, it gives him more freedom. So you feel comfortable with that?

Mr. Duff Conacher: Sure. The Office of the Superintendent of Financial Institutions is also funded by financial institutions.

Mr. Ken Epp: Yes.

Mr. Duff Conacher: We have problem with the ties and interlinks, but not in terms of that.

The Chair: Thank you, Mr. Epp.

Thank you very much, Mr. Conacher.

On behalf of the committee I want to thank you very much for your contribution to both Bill C-8 and the process of the various reports we've had to deal with.

As you probably gathered from Bill C-8, your input was actually heard. Many of the consumer concerns you raised are in fact in the bill itself, so the process has worked quite well. You certainly made a difference. So once again, on behalf of the committee, thank you for your input. You've given us some valuable material to work with, and we're deeply grateful for that.

To the members, I just want to bring up a housekeeping item before we hear from the ombudsman.

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The steering committee has met, and I want to bring you up to date on what has happened. I would like to let you know what they've decided.

First, that we deal with the clause-by-clause consideration of Bill C-8 on Tuesday, March 20, at 3:30 p.m.

Second, in relation to Bill C-13, that the committee proceed to hear officials as soon as possible once the legislation has been referred to the committee, and to hear witnesses on the bill during the week of March 26.

Third, that the committee hold a cost-recovery follow-up round table. Remember, before we left we issued a report on cost recovery, and we want to do a round table to follow up on that.

Fourth, that the finance committee invite those Free Trade Area for the Americas negotiators responsible for matters directly or indirectly touching the financial sector or any other sector relating to the economy or finance. They would be invited to appear before the committee on a date prior to April 6, the last sitting day before the starting date of the Summit of the Americas.

Fifth, that the committee hold a round table session on the green economy, and that the researcher be instructed to prepare outlines of various study topics to be circulated to members for their consideration as possible future business of the committee.

That's basically what the steering committee has decided. We'll deal with this in a formal motion when we have quorum, of course.

Mr. Epp.

Mr. Ken Epp: I don't know whether this is under the aegis of this committee, but we've had a real free-fall in the stock market in the last couple of days. As the finance committee, should we be looking at that, or do we just close our eyes and let it happen?

The Chair: I'm in the hands of the committee. We would have to discuss it. But I don't think now is the time to do it, because of course we have a witness coming in.

Mr. Ken Epp: Yes, I know.

The Chair: But at the next steering committee, yes, we can bring it up. Everybody's free to bring up issues of their concern. But I take that as on notice from you.

Mr. Ken Epp: Okay.

The Chair: The meeting is adjourned.

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