STANDING COMMITTEE ON FINANCE
COMITÉ PERMANENT DES FINANCES
[Recorded by Electronic Apparatus]
Thursday, March 15, 2001
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 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
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.
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
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
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.
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
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
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
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
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
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
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
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
The Chair: Thank you.
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
Mr. William Podmore: Well, there was one on the
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
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.
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
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.
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.
Ms. Pam Kapoor (Assistant Director, National
Anti-Poverty Organization): Thank you, and
good morning, Mr. Chairperson and committee members.
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
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
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
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
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
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
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.
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
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
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
we found numerous instances where the Governor in
Council is permitted to create exemptions.
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
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
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
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
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
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
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
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
We recommend that the new act more clearly define
“reasonable return”. It's much too loose as it
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
Thank you. That's the end of our formal presentation
The Chair: Thank you very much, Ms. Brown and Ms.
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
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
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
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
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
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.
Do the other witnesses have anything to add to this
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
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
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
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?”
have that policy. Well, I may have to walk across the
street to a different branch because I have a different
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
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
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
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.
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
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
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
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
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,
Ms. Maria Neil: I'm talking about the foreign
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.
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
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
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
Mr. Duff Conacher: Yes, that's fine, but that's
aggregate. We want to know the country-by-country
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
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
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
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
I thank you very much for your presentations.
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.
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
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
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.
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.
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
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
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
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
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.
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
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. 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
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
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
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.
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
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
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
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
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.
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.
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
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
Ms. Carolyn Bennett: Okay.
In a financial consumer
organization, in the style you described, which would
Mr. Duff Conacher: Bank statement, credit card.
Ms. Carolyn Bennett: —in the bank statement
an application form, are you saying
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
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
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.
Ms. Carolyn Bennett: Do you think the $20 to $30
membership fee perhaps excludes the people Ms.
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
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
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
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
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
Mr. Ken Epp: Yes, he's required to be paid by the
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
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
To the members, I just want to bring up a
housekeeping item before we hear from the
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
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
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
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. 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
Mr. Ken Epp: Yes, I know.
The Chair: But at the next steering committee,
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.