FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 15, 2001

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[English]

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

As you know, this is the sixth meeting of the Standing Committee on Finance. The order of the day is Bill C-8, an act to establish the Financial Consumer Agency of Canada and to amend certain acts in relation to financial institutions.

We have the pleasure to have with us, from the Canadian Banking Ombudsman Inc., the ombudsman and CEO, Mr. R. Michael Lauber.

Welcome.

Mr. R. Michael Lauber, (Ombudsman and Chief Executive Officer, Canadian Banking Ombudsman Inc.): Thank you, Mr. Chairman.

The Chair: I don't think you need instructions. I think you've been here quite a few times. You have approximately ten minutes to make your presentation.

Mr. Michael Lauber: I'll do that.

Members of the committee, thank you very much for the opportunity to come back to speak to you. As the chairman said, my name is Michael Lauber. I'm the Canadian banking ombudsman, and I have been so since 1996.

Today I want to talk to you about the proposal for the creation of the Canadian financial services ombudsman, known as the CFSO, and the need for a comprehensive redress system. I want to say a few words about the relationship between redress providers such as the CFSO and a regulatory body such as the Financial Consumer Agency of Canada. I'd like to just make a distinction between the two roles.

Before delving into these issues, I want to take a moment to remind you about my organization, the Canadian Banking Ombudsman Inc. and its mandate, its structure, and its review processes.

Canadian Banking Ombudsman Inc. was established in 1996 to help small businesses resolve disputes with their banks that have not been able to be settled directly. Shortly thereafter, our mandate was expanded to include disputes involving individual customers.

The scope of the CBO includes all customers of the bank except for large corporations in the bank financial group. Accordingly, we investigate complaints resulting from banking services, insurance, securities, mutual funds, trusts, and estates. Today, 20% of our investigations relate to wealth management products of the banks, and I believe that number is going to rise.

Disputes are escalated to the CBO only after the bank's internal complaint resolution processes have been exhausted. These include reviews of the bank's customer satisfaction group, their compliance group, and then by the institution's internal ombudsman.

The CBO does not deal with systemic issues such as the general pricing of product, interest rates or branch closures. These issues will likely fall to the Financial Consumer Agency as a regulator—and I'll mention that relationship in a few moments.

The CBO is able to recommend financial compensation to customers for direct loss or damage or inconvenience. Our largest recommended settlement to date is $260,000, but I also mediated a settlement for over $500,000. Obviously, most complaints are settled well under $10,000, but some of them involve intangible solutions as simple as apologies.

The CBO is a completely independent organization managed by a board of directors, at arm's-length from its member banks in the financial institutions. The board of directors includes six independent directors who make up the majority of the board, and five directors who are senior executives of the member institutions. The board sets the budget of the CBO; however, it plays absolutely no role in reviewing or advising on complaints. Full responsibility rests with the ombudsman, and there is no appeal to the board of directors and no board input into recommendations.

I'd like to talk about the CFSO for a moment. In the June 1999 white paper, the Minister of Finance indicated the federal government would work with institutions to establish an ombudsman, independent of government and industry. This is referred to as the CFSO. Much like the CBO, the Canadian Banking Ombudsman Inc., the CFSO would be a non-profit corporation with a majority of directors independent of the industry. The board of directors would appoint the ombudsman and approve the CBO budget.

Under Bill C-8, banks and their designated affiliates will be required to be members of the CFSO, if it's established, while other federally regulated financial institutions may join the CFSO, but will be required to join a third-party dispute resolution system. The bill permits the minister to appoint a majority of the directors.

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The CBO supports a CFSO concept in that it is independent of both the industry and government and is designed to provide quick and cost-effective alternatives to the courts. However, we believe the primary goal must continue to be the establishment of a comprehensive national ombudsman system.

The board of directors of the CBO and I have consistently supported the idea of a single, independent ombudsman providing seamless coverage for all consumers of financial services. We made this recommendation to the MacKay task force in 1997. Considering the convergence taking place in the financial services sector, the need for this kind of one-stop service has never been greater.

Following the passage of this bill, it will be increasingly hard to distinguish between the services provided by a bank, a life insurance company, a credit union, or an investment dealer. Consider the jurisdictional issues involved when CIBC and Great West Life/Investors Group are cross-selling products, a financial planning group is issuing an MBNA credit card, and Merrill Lynch and HSBC have an investment joint venture. Consumers would find it confusing if they had to choose between a variety of slightly different dispute resolution processes, or if they had to use more than one process in a dispute crossing jurisdictional lines.

The idea of a comprehensive ombudsman dealing with financial services sector consumers has been endorsed by the MacKay task force, by the Senate Committee on Banking and Trade, by the members of this committee, and by Secretary of State Peterson when he introduced Bill C-8 in the House for second reading—and I quote from his presentation:

We have had in place for a number of years the Canadian banking ombudsman. In this bill we are trying to expand the role of the Canadian banking ombudsman so that it covers all financial institutions. In an era of conglomeration where different types of financial institutions, such as banks, insurers and trust companies, are coming under the same ownership and the same roof, we think consumers would be better served if they could go to one dispute resolution centre for all their disputes regarding financial services, as opposed to having to find different ones depending upon what type of financial service they're having difficulties with. We also believe that the financial institutions sector will be better served by having this type of single dispute resolution centre.

Of course under the constitution we cannot mandate that entities which are not owned by banks have to come to this centre. That is why we have undertaken to work in very close co-operation with the joint forum of financial regulators from the provinces to find a way to bring together the disparate dispute resolution mechanisms aimed at helping consumers today.

Consumer groups also support the concept of a single national ombudsman who would provide a single avenue for dealing with all complaints. This option would be easy to use for consumers and would eliminate gaps in coverage and jurisdiction.

The federal government is currently participating in a task force with the provincial joint forum of market conduct regulators and representatives of the financial services industry, trying to establish a national dispute resolution process to cover all financial services from banks, insurance, and investment, to individual financial planners. I urge the committee to encourage the government to continue its effort with industry and the provinces on a priority basis.

Support for a national single-window ombudsman process is widespread. It would avoid a patchwork and confusing system of different ombudsman schemes throughout the country. The single national ombudsman is also the direction being put in place in the U.K., and Australia is slowly moving in that direction. It's following the route of convergence.

Finally, I'd just like to mention the difference in the relationship between a redress provider, i.e., an ombudsman, and a regulator.

Bill C-8 also mandates the creation of a regulator, the Financial Consumer Agency of Canada, to enforce consumer-oriented laws and regulations for federal financial institutions and to monitor industry self-regulation.

The relationship between the agency and ombudsman has been largely undefined in Bill C-8, and I'd like to emphasize their different roles.

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The roles of a regulator and ombudsman are complementary but they're fundamentally different. Regulators monitor and enforce industry-wide rules and conduct. The agency will not be a dispute resolution body and will not have the power to provide redress to customers. Regulators in Canada do not have the power of redress. On the other hand, an ombudsman is a dispute resolution body for individual consumers and business complaints and may award compensation for damages suffered. An ombudsman has no regulatory or enforcement powers. The roles of the two are very different and separate. Undoubtedly, there will be a sharing of statistical data between the parties, but that may be the principal contact.

In conclusion, I want to leave you with the following recommendation: The federal government should continue to work with the industry and provinces toward creating a national financial services ombudsman for customers of all financial institutions.

Bill C-8 will allow greater convergence of financial services and will change the way Canadians deal with their financial institutions. Canadians will need a single, strong, independent ombudsman to help settle any disputes that may arise and to avoid jurisdictional confusion along sectoral lines.

Again, thank you for inviting me. I'd be happy to answer any of your questions.

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

We'll go to Mr. Epp for a ten-minute round.

Mr. Ken Epp (Elk Island, Canadian Alliance): Thank you, Mr. Chairman.

Thank you for your presentation, Mr. Lauber. I have some questions for you. The first ones are rather general.

How many years have you been ombudsman? Were you the first one, or have you been—

Mr. Michael Lauber: I'm the first one.

Mr. Ken Epp: You're the first and only one ever in Canada.

Mr. Michael Lauber: That's right, and it has almost been five years.

Mr. Ken Epp: That makes you a very unique person.

In your five years, how many complaints have you dealt with?

Mr. Michael Lauber: Oh, 800 or 900.

Mr. Ken Epp: How big a staff do you have?

Mr. Michael Lauber: We now have eight.

Mr. Ken Epp: Is that enough?

Mr. Michael Lauber: It is enough at the present time.

Mr. Ken Epp: If Bill C-8 comes into force as envisioned, are you going to apply for the job? How do you get your job?

Mr. Michael Lauber: I'm going to have to assume that whatever emerges, whether it be the CFSO or some federal-provincial joint venture, the organization will have a board of directors. The board of directors will hire an ombudsman.

Mr. Ken Epp: Okay, so you were hired—

Mr. Michael Lauber: If I like the way it's structured, I probably would be a candidate.

Mr. Ken Epp: Yes, well, I think you should be, with your experience.

You have a board presently that consists of five members from the banks—

Mr. Michael Lauber: That's correct.

Mr. Ken Epp: —and six members at large. How are the members at large chosen?

Mr. Michael Lauber: The members at large are chosen...really, the independent directors form a nominating committee. They meet as a nominating committee, they do a search, they find the independent directors, they identify them, and they nominate them to the full board of directors, which they control. I guess the final step is that they're then elected by the members.

Mr. Ken Epp: Is there a better way of doing this? We hold you free and not responsible to your board for any answers you give to the committee today.

Mr. Michael Lauber: Thank you.

Mr. Ken Epp: You have diplomatic immunity.

Mr. Michael Lauber: There are a number of ways of going about this. The issue is to have your independent directors as independent as possible. They should be people who are quality people who are independent of mind and independent of the institutions.

There are any number of ways of getting them in place. The system we have is one that was worked out by the board. There are other systems in which you could have an outside panel do the search and nomination and so forth. You could go to a retired chief justice or someone like that and ask him to conduct a panel.

There are many ways, but your point is valid. It is very important that those people be independent.

Now, on our current board, we have a university president from Montreal, we have the Hon. Lincoln Alexander, a former Lieutenant-Governor of Ontario, we have a former chair of the Canadian Institute of Chartered Accountants, and so forth. I would say it's a very credible group of independent directors.

Mr. Ken Epp: Besides hiring you and approving your budget, what do they do?

Mr. Michael Lauber: They provide oversight to the office. I've often said the board is there to quit. If the institutions ever pressure the office...their principal roles are to make sure that doesn't happen and to support my position. Otherwise, yes, its budget, its general oversight of the office. We talk with the board, I bring issues of general policy, procedure—I seek their advice on a lot of general issues.

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Mr. Ken Epp: How often to do you meet with them?

Mr. Michael Lauber: Quarterly.

Mr. Ken Epp: And is that also what's envisioned in Bill C-8?

Mr. Michael Lauber: Bill C-8 is a blank sheet of paper at this point. I assume the drafters of the new system would probably set up something structurally more or less along the same lines. In other words, what's contemplated is a corporate type of structure as a not-for-profit thing. So it would be a normal board, and so forth. As to how the directors get there, Bill C-8 contemplates the minister; it gives him the ability, but doesn't require him to appoint a majority of the directors.

Mr. Ken Epp: Yes.

When you do your work, when people bring issues to you, after they've tried with their own banks and the bank ombudsmen or the bank they're dealing with, and that's failed, then they finally come to you—I think that's the process.

Mr. Michael Lauber: That's right.

Mr. Ken Epp: Of those 800 or 900 cases you've dealt with, in how many of them have you ruled in favour of the complainant, and in how many were they denied and the banks won?

Mr. Michael Lauber: Overall, rulings in favour of the customer are between 25% and 30%. I could argue that number is somewhat high, because the customer's issue has been through a very rigorous process before that and through the ombudsman office at the bank, which is structured to take the same kind of independent view of the case as we take. But it's 25 to 30%. In addition to that, in maybe another 5% or 6% or 8% of cases we may make some nominal recommendation, a goodwill gesture, or something like that.

Mr. Ken Epp: Okay. Your power right now is to make recommendations.

Mr. Michael Lauber: That's correct.

Mr. Ken Epp: They're not binding.

Mr. Michael Lauber: They're not binding.

Mr. Ken Epp: Should they be binding?

Mr. Michael Lauber: We have, based on those numbers I gave you, made several hundred recommendations, and every single recommendation has been followed by the institution. So at this point I would say there is no need at all to make them binding.

Sometime in the future, if we end up with a different structural organization that has small institutions as members, maybe right down to individual financial planners and so forth, that may be required. But at this stage, I would say not. The structure is better, I believe, if it is non-binding than if binding. There's far more challenge in it and far more discipline imposed on the ombudsman to work and to do a thorough and professional job in both directions, as regards both the institution and the customer, when it's not binding. We have to sell the bank on the reasonableness of our position, and that forces a really significant discipline on us, which is good.

Mr. Ken Epp: So you've had 25% or 30% where you made a recommendation to give the customer the benefit of the doubt, and in every case the banks have complied with your recommendation.

Mr. Michael Lauber: Absolutely.

Mr. Ken Epp: That's amazing. You must be a very persuasive character. You should be in politics maybe.

Mr. Michael Lauber: The only thing is, if they didn't follow my recommendation, I would have to publicize that. So there's a little bit of a stick behind the argument.

Mr. Ken Epp: Yes. Are you required to by legislation?

Mr. Michael Lauber: No, I'm required to by the terms of reference.

Mr. Ken Epp: Oh, okay. Are you trying—

The Chair: I was just going to ask a question based on your question.

Mr. Ken Epp: Sure. Do you want me to take the chair while you do that?

The Chair: Okay.

Mr. Ken Epp: Mr. Bevilacqua has the floor.

The Chair: As regards the 25% to 30%, would you say that when they're dealing with the individual bank ombudsmen, you get the same kind of result?

Mr. Michael Lauber: The individual bank ombudsmen's statistics are that they resolve approximately half of the complaints fully in favour of the customer, while in about another 20% the customer's complaint results in partial compensation, or sharing, or something like that. So there's either full or partial resolution by their assessment in 70% of the complaints that come there.

The Chair: But they deal, obviously, with more people than you would deal with.

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Mr. Michael Lauber: Yes. Last year the individual bank ombudsmen in the aggregate dealt with just over 1,800 complaints. Interestingly, that's down from over 3,000 complaints in 1998. So the number of complaints declined.

The Chair: That's not many when you consider the number of clients banks have.

Mr. Michael Lauber: In your customer satisfaction groups, I don't have any numbers. I'm trying to put them together for inclusion in my annual report, hopefully. At the customer satisfaction complaint compliance level there would be thousands, obviously, maybe 30,000, 40,000, or 50,000. Who knows? I don't have the numbers, but there'd be a significant number there. They're mostly resolved.

Of that, 1,800 came to the ombudsmen. They're the more judgmental complaints, some of them the more aggressive people. There's an element of people out there who will never quit if there's somewhere to go, but then funnelling into us is just under 200 a year.

The Chair: The presentation we heard today basically said there were 20 million people perhaps not satisfied with banks. Do you think that's inflated? I'm just kidding.

Mr. Epp, go ahead.

Mr. Ken Epp: Thanks, Mr. Bevilacqua. I return the chair to you.

I have a few more questions. You mentioned an annual report. As members of Parliament, we get a couple of these pretty well every day. Is it to be expected that somewhere in that pile of annual reports we get every year is one from you?

Mr. Michael Lauber: Yes.

Mr. Ken Epp: Do you distribute them to MPs?

Mr. Michael Lauber: Yes. I brought them to you last fall when I was here, so I didn't bring them back again. It's orange; it sticks out.

Mr. Ken Epp: I will have to go look it up again.

Mr. Michael Lauber: I'd be happy to provide the committee with another annual report again, if you want.

Mr. Ken Epp: I'm sure we have it somewhere in our files. I don't know which one. If we kept them all, soon there wouldn't be room in our offices for us.

Mr. Michael Lauber: I know. That's why I didn't bring them today.

Mr. Ken Epp: You distribute your annual report to members of Parliament and senators, I'm sure. Who else do those annual reports go to? To the banks, obviously, and—

Mr. Michael Lauber: Yes. We send it to every federal and provincial parliamentarian in the country. We send it out to a very large media list. We send it around the world to other ombudsmen, and so forth. We send it to quite a large number of academics who have asked to be on the mailing list. We have built up a list of people who have dealt with us, or have written and asked for information in the past, and we send it out.

Mr. Ken Epp: You're not required under legislation, though, to table it in Parliament.

Mr. Michael Lauber: No.

Mr. Ken Epp: You're not even required to give it to the minister, but I'm sure you do.

Mr. Michael Lauber: We do, yes.

The next annual report I hope will be out in April, if I get time to finish writing it.

Mr. Ken Epp: My last question to you is, looking at Bill C-8, which is the object of our discussion here, do you have any specific recommendations for things we should put in that aren't there now, or something that is there now that we should take out, or something that's there that should be changed?

Mr. Michael Lauber: No, I think with respect to the ombudsman issue the recommendations are permissive, and I think that is good, because it allows flexibility to entertain some alternatives, which are on the horizon. So I think it's fine.

Mr. Ken Epp: Great. Thank you.

Thank you, Mr. Chairman.

The Chair: Thank you, Mr. Epp.

Madame Picard.

[Translation]

Ms. Pauline Picard (Drummond, BQ): I'm trying to understand. If Bill C-8 is adopted and the position of Canadian Financial Services Ombudsman created, will the agency that you currently represent be dismantled? Or, will we end up with a Banking Ombudsman as well as an ombudsman who reports to the Financial Consumer Agency of Canada?

[English]

Mr. Michael Lauber: I'll answer you in English, if I may.

If it ends up as a federal system, there will only be one ombudsman, and what will happen to our office, how it would transition in, that's unknown at this time. Whether our office would transition in or whether they'd start from absolutely new staff, and so forth, would be really a decision of the board of directors that's put in place, and so we really don't know. I think it would be unfortunate to lose the experience that's been gained in our office over four and a half years.

[Translation]

Ms. Pauline Picard: In your opinion, given what is proposed in Bill C-8, namely the creation of a Canadian Financial Services Ombudsman, what difference is there between your agency and the one being proposed? Do you have any particular concerns?

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[English]

Mr. Michael Lauber: There are the two levels that I talked about. There's the basic CFSO as contemplated under Bill C-8. Then there is the national ombudsman system that Minister Peterson talked about in his announcement, which contemplates a national system to include everything from banks, insurance companies, credit unions, trust companies, and so forth.

So there are the two opportunities there. With what's going on in the industry from the customer point of view, from the industry point of view, the national scheme is far superior to just a federally oriented scheme that is focused on banks only because of the jurisdictional problems. If the bank sells a provincially regulated product, securities, mutual fund or whatever, whose jurisdiction is it? Is it federal or is it provincial? The customer would be in a mess. It would also be very expensive for them.

You have the two systems there. Bill C-8 is written in a way that it says the minister may designate an organization whose purpose is to deal with complaints from financial institutions. The minister could designate something that is just for banks or, if the negotiations are successful for a national scheme, under Bill C-8 he could say, I'll designate that one. He has that option.

That's why I said, when you asked about the legislation, that the legislation the way it is written, being permissive, allows the minister a great deal of flexibility to deal with the alternatives that are becoming available, all within the legislation and consistent with it.

[Translation]

Ms. Pauline Picard: I see. That means that if we get a new minister at some point, this could change as well. That's not clear in Bill C-8. It's left to the minister's discretion. That's what you meant. If the minister ever changes, then the philosophy could change as well. This bill provides some measure of flexibility.

[English]

Mr. Michael Lauber: It would be working so well, you'd never want to change it.

Yes, you're right. Obviously, what you can designate, you can un-designate.

[Translation]

Ms. Pauline Picard: Thank you very much.

[English]

The Chair: Mr. McCallum.

Mr. John McCallum (Markham, Lib.): I have one little question that might be slightly out of your jurisdiction.

It seems from what you said that very clearly it's a no-brainer, that just about everybody under the sun wants this national organization because it's more efficient and more consumer-friendly, and the MacKay task force.... But it seems as though we haven't arrived there yet, even though it's a no-brainer that it's where we ought to arrive.

Do you think we're heading there pretty fast? Or are there significant federal-provincial differences or quarrels that are impeding it? Why can't we somehow make this happen?

Mr. Michael Lauber: I'm not directly involved in the process, but I'll comment on it, if I may, Mr. McCallum.

The first meeting of the task force has been held. The second meeting of the task force is scheduled for later this month. I know the task force is comprised of a representative from the Department of Finance and a number of regulators at the provincial level, for insurance, pensions, securities, and so forth, who are participants in the joint forum. If you're not familiar with it, the joint forum of market conduct regulators is, I guess I would describe it, an association of provincial regulators whose principal role over the last two years since it was formed has been to try to harmonize legislation of regulation across the country. It's a virtual approach to some things.

So we have representatives from the joint forum, from the Department of Finance and from the industry: the Canadian Bankers Association, the Canadian Life and Health Insurance Association, the Mutual Fund Dealers Association, and so forth. They're all represented there, as well as a representative from a consumers' group. Harold MacKay is part of that.

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That group has met once and is proceeding.

What are its chances of success? Federal-provincial negotiations have not been easy, so....

The Chair: Thank you.

Mr. Stoffer.

Mr. Peter Stoffer (Sackville—Musquodoboit Valley—Eastern Shore, NDP): Thank you, Mr. Chair.

This is my first time on the finance committee, and I want to say what an honour it is because I've heard about the great work the great chairperson has done for this great committee.

The Chair: You have more time to talk about that.

Some hon. members: Oh, oh!

An hon. member: And the vice-chair.

Mr. Peter Stoffer: And the vice-chair, of course. Exactly.

I just want to say, sir, thanks for your presentation. It's unfortunate Lorne Nystrom couldn't be here this morning, but he asked me to ask a couple of questions based on his notes here. He wants to know if by any chance you have at all studied the British banking ombudsman situation.

Mr. Michael Lauber: Yes, I have. I've been over there, I've met with them, and I know the new ombudsman. I've been to Australia and I've studied their system, the New Zealand system...you name it, I've looked at them all.

Ours is the best, by the way.

Mr. Peter Stoffer: Would it be correct to say that the British banking ombudsman has the binding power to make the banks pay compensation due to a complaint for financial loss, inconvenience, or stress?

Mr. Michael Lauber: Absolutely, but so do we.

Mr. Peter Stoffer: But yours is not binding.

Mr. Michael Lauber: It's effectively binding because nobody has failed to comply.

Mr. Peter Stoffer: No, but take a situation, for example, like the one where the Bank of Nova Scotia recently did something I thought was one of the most disgusting things I've ever seen a bank do. It gave out $5,000 cheques—our leader got one—saying, you earned it and you deserve it. By the way, in the fine print at the bottom it said there was an 18.5% interest charge. A lot of seniors received this money, and I thought it was taking advantage of people at a very vulnerable time.

Now, suppose some people had unknowingly cashed these cheques, not realizing they were going to have to pay the money back with interest as a cash advance on their credit card, and suppose they had complained to you. Your reaction might have been to say “Bad bank! You shouldn't have done that!” Unfortunately, there's really nothing in your power to either make them eat the loss, for example, or stop them from doing it again. That's basically the situation, isn't it?

Mr. Michael Lauber: That's essentially a systemic issue, and in the future I would think the Financial Consumer Agency would jump on situations like that. In fact, in that particular case the bank was criticized widely, it apologized profusely, and it agreed to reverse, on demand, any transaction that anybody had entered into. So the system worked very well there.

Coming back to the U.K. example, yes, they have binding power. Now, the U.K. had an industry body the same as ours. They're going through the process of becoming a government agency. Yes, they have binding powers, and they are creating a nightmare in their system. They could do severe damage to their process.

I'm a chartered accountant, by the way, not a lawyer. I'm going to be talking to you about law here, so if I'm a little off base, I apologize.

If you have a government body that has the power to make binding decisions and to force the organizations to be members, then you're denying them their rights of natural justice—or, in the U.K., rights under some European convention. They have now built a system in the U.K., because of these binding powers, where the ombudsman process has to allow for an appeal function. After the ombudsman has finished with it now, the customer has the right to appeal and have a hearing with witnesses, rules of evidence, transcription of testimony, and so forth. They've taken what should be an informal, fairly quick ombudsman system and they've turned it into a mini-court. That's one of the risks of having binding powers. The same thing could happen here, and we have to be very careful about that. It's not in anybody's interest to do that. You'll just turn it into a court, and that's no advantage. We've got a perfectly good court system if you want to go to court.

Mr. Peter Stoffer: Sir, in June of 1999 the federal government made a commitment to establish an independent CFSO, which would be incorporated as a not-for-profit corporation and funded by its members. Under Bill C-8 the government appears to have gone back on this commitment. Proposed section 455.1 of the legislation stipulates the minister “may” designate an ombudsman rather than “shall” designate an ombudsman. Why do you think the change was made?

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In June 1999 they seemed to think it was a good idea, but in Bill C-8 they seem to have gone back on that. Why do you think that is?

Mr. Michael Lauber: I would think they think it's an equally good idea. I think it's just a matter of flexibility. I think it's superior wording this way. I have no idea why they made it, but I think it's an improvement in the legislation because it allows flexibility to deal with other issues, with moving times, changing times. Remember, we're taking a snapshot today in an industry that is changing dynamically by the hour as we speak, so I think “may” gives flexibility.

Mr. Peter Stoffer: And again in 1999, the white paper of the CFSO on financial services reform, which the government committed itself to.... Why do you think in Bill C-8 that was not explicitly established?

Mr. Michael Lauber: I'm sorry, would you do that one again?

Mr. Peter Stoffer: In the 1999 white paper on financial services reform, there was a lot of talk about changes that are required and the reform that will require, yet in Bill C-8 the reform in this aspect of financial services was not explicitly established. It's really watered down as compared to the 1998 white paper. Why the change, do you think? I know it's a difficult question to answer.

Mr. Michael Lauber: Yes, I really—

Mr. Peter Stoffer: In two years there's quite a change in that regard.

Mr. Michael Lauber: I really don't know, but I'd like just to point out, by the way, that the white paper does state that the consumer groups strongly support the concept of a national financial services ombudsman and that he be independent of the banks. That's stated in the white paper.

Mr. Peter Stoffer: Would you then support a publicly funded ombudsman?

Mr. Michael Lauber: The trouble is that if you have a publicly funded ombudsman, it has to become legislated because a government has no ability to fund something where it doesn't have legislative authority. So now you're back into the circle again.

Mr. Peter Stoffer: So would your answer be no?

Mr. Michael Lauber: My answer would be no.

Mr. Peter Stoffer: Okay. Thank you, Mr. Chair.

The Chair: Thank you, Mr. Stoffer.

Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC): Thank you, Mr. Chair.

Thank you for your time and intervention this morning.

How are the ombudsman's services promoted to consumers? I've seen some notices in banks, but what's the breadth of your promotional activities?

Mr. Michael Lauber: Well, let's start with the process. The customer, of course, complains to the bank. Their complaints escalate, if necessary, into the customer satisfaction group to the ombudsman office. If the ombudsman is not satisfying them, the ombudsman and the bank will tell them about our office, and the letter to the customer will say, “and you also have the ability to appeal your decision to the Canadian Banking Ombudsman” and give them the address.

That's the principal way most people get to us, but I also promote our office. With the current confusion I haven't been as aggressive in the last six or eight months on it, but by and large I do this through speaking and media.

A typical day—I go back, I guess, a year ago now—I went to Calgary. The reason for going to Calgary was to speak to...I think it was the Chamber of Commerce. But I did the CBC radio drive show at 7 a.m.; I did another network at 7:45 a.m.; I did two television interviews in the morning, a radio call-in show, gave my speech at noon, had a couple of meetings in the afternoon with government officials, caught the drive-home show on CBC radio again at 5:30 p.m, got on the plane, and came home.

I did the same thing in Edmonton, too, a while back. I think I saturated the province.

I've relied heavily on that. I did the same thing in Halifax—oh, it was probably a year and a half ago—and so forth, and I think it's an effective way of doing it.

My estimate is that well over 60% of people are aware of the ombudsman process at this time. When MacKay did his research for his report in the spring of 1998, they had 40% of people who were aware of the ombudsman process at that time. With all the publicity, it's got to be over 60%.

Mr. Scott Brison: One last question. You say that today 20% of your investigations are related to wealth management projects. What is the nature of those complaints, or what types of complaints are related to wealth management projects?

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Mr. Michael Lauber: Well, the categories in wealth management can be anything from a term deposit through a security to a mutual fund or anything else like that. But, of that number, more than half are securities. These are suitability of investments—know your client rules for trading through your broker, whether it's a discount broker or a full-service broker—or mutual fund sales. Mutual funds are sold both through the investment-dealer subsidiaries of the bank and also on the bank floor now that there are so many licensed people on the branch floor, and that's what they're dealing. That number, I think, is going like that partially due to the decline in the stock market, but I think that figure could well have been 30% even without a reversal in the markets.

Mr. Scott Brison: Thank you.

The Chair: Thank you very much, Mr. Brison. I guess that concludes—no more questions, right?

Oh. Mr. Pillitteri.

Mr. Gary Pillitteri (Niagara Falls, Lib.): Mr. Chairman, sometimes you always have the tendency of not looking to both sides fast enough.

The Chair: I have no problem looking to the right but—

Mr. Gary Pillitteri: Thank you very much.

Good morning, Mr. Lauber.

Before you, there was a group of individuals who were here, and some comments were made. One was that you were not doing a good job, but let's say, if we could get you more to earn.... I know you've done an excellent job, but let's see if you could answer some of my questions. Maybe they were not able to ask them to you directly, and maybe I'll ask them to you on their behalf.

In this new legislation, Bill C-8, and in some of the complaints you've had before from anti-poverty groups and so on, you've heard that some people are not able to open up accounts and really are not being cared for. They say they're being, in a sense, not treated as equal to other Canadians.

Does that, in this bill, since you have read it...I mean you've read the part—

Mr. Michael Lauber: Very little of it.

Mr. Gary Pillitteri: —of the ombudsman. Do you think it's adequately protecting some of these groups, and does the banking system of tomorrow address some of those complaints made by these groups? Some of them might just be complaining for the sake of complaining, but does it address it better than how the present legislation addresses how one deals with the banks?

Mr. Michael Lauber: In our office, we don't get complaints of customers not being able to open an account as a rule. They seldom come, and if we refer them back to the bank, they usually resolve—they're more of a systemic nature.

Those issues are going to fall primarily to the agency, the Financial Consumer Agency of Canada. That's what that body's for—to deal with systemic problems. It will probably address branch closings. It will address the low-income accounts. It will have the ability to make regulations that will deal with that, and I understand that it intends to.

So that is the role of the agency now. Yes, a person who's been denied an account does have access to our office. I'm not saying that we wouldn't deal with it. We have dealt with some small-business people who, because of their personal financial circumstances—usually a bad credit history—can't get an account. We've dealt with some of those, but, generally speaking, that type of complaint is resolved within the bank and doesn't need to come to us. But the agency is the one that will oversee that type of thing. It will set any rules and regulations, and it will enforce them. It'll have the power to enforce compliance by the bank, I'm quite sure.

Mr. Gary Pillitteri: So in other words, what you're saying to me now is that this bill coming forward would be far superior to what we have now because it would have an agency that could resolve some of these issues?

Mr. Michael Lauber: Sure. The agency's a regulator, and its responsibility will be to enforce the consumer provisions of the Bank Act, but it also has the ability to create regulations. So it can do that.

So where there's maybe some criticism of it, and I'm no lawyer to study this...but there is going to be an agency. There's going to be a commissioner of that agency, and that agency will presumably hear from the public and from the consumer groups and react accordingly.

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Mr. Gary Pillitteri: But, Mr. Lauber, let me say this. This morning you've probably finished it, because I don't think there are too many lawyers sitting at this table.

Thank you very much.

The Chair: Thank you, Mr. Pillitteri.

Are there any further questions...on my left or my right?

I personally would like to thank you very much, not only for your contribution today, but for your contribution throughout the process.

This has been a four-year project that has, quite frankly, taken a bit too long as far as I'm concerned. You are, actually, the last witness for our hearings. Next week we will proceed to clause-by-clause, and I predict that by next week the work of this committee vis-à-vis Bill C-8 will in fact be completed.

Once again, thank you. You've obviously had an impact on the legislation, and we've taken note of the issues you raised today. We will keep those in mind as we go towards studying the clause-by-clause.

Thanks very much.

Mr. Michael Lauber: Thank you for your committee's attention.

The Chair: Thank you. The meeting is adjourned.