Bill C-37 (Historical)

An Act to amend the law governing financial institutions and to provide for related and consequential matters

This enactment amends a number of Acts governing financial institutions. It also amends legislation related to the regulation of financial institutions. Notable among the amendments are the following:
(a) amendments to the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act, and the Trust and Loan Companies Act aimed at achieving three key objectives:
(i) enhancing the interests of consumers,
(ii) increasing legislative and regulatory efficiency, and
(iii) adapting those Acts to new developments;
(b) amendments to the Bills of Exchange Act to provide for the introduction of electronic cheque imaging; and
(c) technical amendments to the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act, the Trust and Loan Companies Act, the Bank of Canada Act, the Bills of Exchange Act, the Canada Business Corporations Act, the Canada Deposit Insurance Corporation Act, the Canadian Payments Act, the Financial Consumer Agency of Canada Act, the Green Shield Canada Act, the Investment Canada Act, the National Housing Act, the Payment Clearing and Settlement Act and the Winding-up and Restructuring Act.

Bank Act

[Diane Ablonczy, Conservative, Parliamentary Secretary to the Minister of Finance]

Mr. Speaker, I appreciate the opportunity to introduce at third reading C-37. The bill would amend the legislation concerning the framework for financial institutions operating in Canada and it comes out of the five year review of the Bank Act undertaken by Parliament.

The financial services sector is key to the success of a modern industrial economy. That goes without saying. The sector plays a unique role in fuelling the growth that is essential to the success of the Canadian economy, but the significance of this proposed legislation goes beyond our borders. Canada is recognized internationally for our safe and secure financial sector and the bill would help ensure that Canada remains a world leader.

The goal of Canada's new government is to improve our quality of life and make Canada a world leader for today and future generations. How will we do that? Along with November's economic and fiscal update, the Minister of Finance introduced “Advantage Canada”. This long term plan will achieve a higher standard of living and better quality of life for Canadians as the world economy continues to transform.

I will talk a bit about the plan and illustrate just how Bill C-37 fits in.

“Advantage Canada” is rooted in the realities of global competition and Canada's existing strengths and economic challenges. As a long term vision, it will serve as the framework for government decision making for years to come. Competition drives firms to become more efficient, invest in new technologies and introduce new products and services that benefit consumers. A highly competitive and open national economy also helps our companies and organizations to be more successful when competing in global markets, which means more and better jobs in Canada.

Government has a role to play in creating the ground rules for competition in Canada. Consistent with the overall purpose and principles of the “Advantage Canada” plan, Canada's framework of competition will create competitive marketplaces that serve both individual and business consumers with low prices, choice, quality and service. The investment will also drive and foster innovation investment and efficiency that grow productivity and competitiveness and it will promote a more resilient adaptable economy.

“Advantage Canada” is about making Canada a world leader and a safe and efficient financial system is crucial to achieving that goal.

Canada has a strong and sound financial system that serves Canadians well. It is an asset unto itself, providing high end, knowledge based and well-paying jobs for Canadians. Of course a strong financial system needs to be able to adapt to the evolving needs of households and businesses.

Keeping Canada's financial institutions and markets innovative and competitive with a flexible regulatory framework founded on sound principles will ensure that they continue to meet not only the needs of our growing economy but also the needs of Canadians. That is where Bill C-37 comes in.

Just as “Advantage Canada” is about making Canada a leader in the world, the bill is about ensuring that Canada's financial system remains a leader in the world. To attain that goal, Canada must have a regulatory framework that allows financial sector participants to operate as efficiently and effectively as possible.

The Government of Canada is responsible for maintaining the safety and soundness of the financial institution sector. It is also responsible for ensuring that consumers and businesses are properly served and protected. The regular five year review of the financial sector framework is an important tool in meeting these responsibilities, and a consultation process was an integral part of that review.

A large and representative group of stakeholders provided comments to shape the review of the financial sector statutes. Over 50 submissions were received from various stakeholders, including industry associations, financial institutions, consumer groups and individual Canadians. Those submissions culminated in a white paper issued by the Minister of Finance this past June. The drafting of Bill C-37 followed to legislate the proposals set out in the white paper.

While stakeholders agreed that no major overhaul was needed, there was acknowledgement that some steps could be taken to enhance the interest of consumers, increase legislative and regulatory efficiency and adapt the framework to new developments. These three objectives are the framework on which the bill is built.

I will now illustrate how Bill C-37 meets these objectives.

First, Canada's new government wants to ensure that the interests of consumers are well served. As members can imagine, competition in the industry in technological innovation can sometimes make for a confusing array of products and services confronting consumers. It is therefore important that consumers have the information available to them to help make informed decisions.

That is why Bill C-37 proposes to improve disclosure to consumers. Perhaps one of the best examples of improved disclosure to consumers relates to the growth of online services. Currently, federally regulated financial institutions must disclose in their branches information on the amounts charged for services normally provided to their customers and the public.

However, with consumers increasingly managing their finances using Internet banking, these disclosure requirements currently do not extend to the online world. To ensure that consumers have sufficient information, Bill C-37 proposes to harmonize online disclosure requirements with those of the in-branch requirements. This proposed legislation will allow consumers to compare banking products and services more easily online.

Another important measure to address consumer interests in the bill is the proposal relating to complaint handling procedures. Federally regulated financial institutions are required to have procedures and staff in place to deal with complaints from consumers. These procedures must be filed with the Commissioner of the Financial Consumer Agency of Canada and must be provided to consumers when they open a deposit account.

However, there are currently no requirements to ensure that consumers have access to information on these procedures on an ongoing basis. In addition, consumers who do not open an account, but rather obtain other products and services such as a mortgage, do not receive any information on complaint handling procedures.

Consumer groups have raised concerns that consumers may be unable to readily obtain the necessary information on the proper complaint handling procedures when a complaint with their financial institution arises. Bill C-37 addresses that issue by proposing amendments to the financial institutions statutes that will require financial institutions to make their complaint handling procedures publicly available for all consumers to access whenever they choose.

One of the biggest advantages of a regular review of the financial sector, such as we have in Canada, is the ability to modify just the framework as the sector changes and evolves. For example, there is now increased competition in Canada from foreign banks. The framework encourages competition through the entry of foreign banks into the Canadian market. However, while foreign banks have considerable flexibility to do business in Canada, some aspects of the current regulatory mechanisms have been criticized as being complex and burdensome.

An area of significant concern has been the regulatory burden placed on the so-called near banks. These foreign entities are not regulated as banks in their home jurisdictions, but provide banking type services such as consumer loans. Of particular concern is the ministerial entry approval that near banks must obtain to undertake unregulated activities. This requirement is regarded as unnecessary and costly. Moreover, it results in delayed transactions and provides little benefit.

To simplify the foreign bank entry framework and reduce the administrative burden, Bill C-37 proposes to narrow the framework to focus on real foreign banks and remove near banks from the foreign bank entry framework by eliminating the entry approval for near banks undertaking unregulated financial services.

The financial services sector has changed dramatically in recent years. Globalization has certainly played a major part in this change but so too has convergence and consolidation in the industry and, of course, advances in technology have changed the way we do banking today. One just needs to look at the way cheques have been processed for years.

Traditionally, the cheque clearing process involved the physical delivery of cheques to the issuing financial institution before a decision could be made whether or not to make the payment. Now, with the use of computer scanning technology, cheques can be sent electronically to the originating financial institution.

The faster processing enables financial institutions to clear cheques more quickly, thus allowing consumers and businesses to have more timely access to funds. To reflect the faster cheque processing time, Bill C-37 proposes to facilitate the introduction of regulations limiting hold times imposed on cheques.

Instead of using this regulatory power, however, the government is in the process of finalizing an agreement with the banking industry to reduce the maximum hold period voluntarily for cheques to seven days from ten days. Once cheque imaging technology is fully implemented across Canada, the cheque hold time will further be reduced from seven days down to four days. This, of course, represents a significant benefit for consumers and businesses alike.

Once more, these changes illustrate the importance of having an up to date framework to allow financial institutions to evolve and prosper while benefiting consumers.

Bill C-37 also contains a proposal that would attract additional expertise to the industry. Specifically, the bill proposes to reduce the board of directors residency requirement for Canadian financial institutions from two-thirds to a majority. This would l allow Canadian financial institutions to add more foreign experts to their board. It would also enhance flexibility and give financial institutions new scope to pursue global business opportunities while maintaining a strong Canadian presence on their boards.

All told, the proposals in Bill C-37 will help modernize the regulations for our financial institutions, which makes this bill important for a number of reasons. First and foremost, the bill is important because it would cut red tape and advance the interests of consumers. It is also important because it would amend the legislative framework so that Canadian financial institutions can better compete in the international marketplace. The bill is important for Canada because it would ensure that Canada continues to be a world leader in the financial services industry.

I therefore would ask all hon. members to give this bill careful consideration and allow it to pass without delay.

The House proceeded to the consideration of Bill C-37, An Act to amend the law governing financial institutions and to provide for related and consequential matters, as reported (with amendment) from the committee.

Business of the House

[Peter Van Loan, Conservative, Leader of the Government in the House of Commons and Minister for Democratic Reform]

Mr. Speaker, today we will continue the debate on the Liberal opposition motion.

Tomorrow morning we will begin debate on the procedural motion relating to the back to work legislation, to which the opposition House leader was referring. Also, we will have Bill C-45, the Fisheries Act, following question period.

On Monday, we would like to conclude the debate on the statutory order regarding the Anti-terrorism Act, which is very important for Canadians for public security reasons. We are also getting down to the deadline when certain provisions of the Anti-terrorism Act will sunset.

I have consulted with the other parties and I will propose a related motion at the end of my business statement.

Next week we will consider the following bills: Bill C-37, financial institutions; Bill C-41, competition; Bill C-11, transport; Bill S-3, defence; Bill C-42, the Quarantine Act; Bill C-36, Canada pension plan and old age security; Bill C-10, mandatory minimum penalties; and depending on developments regarding the railway strike, we may call the procedural motion relating to the back to work legislation.

Thursday, March 1 shall be an allotted day.

As I mentioned earlier, following discussions with the House leaders of the other parties, Mr. Speaker, I believe if you seek it, you would find unanimous consent of the House to adopt the following motion. I move:

Motion

That, notwithstanding any Standing Order or usual practices of the House, once the Statutory Order regarding the Anti-terrorism Act is called on Monday, February 26, and when no member rises to speak on debate or at the expiry of the time provided for Government Orders, all questions necessary to dispose of the Statutory Order regarding the Anti-terrorism Act be deemed put, a recorded division deemed demanded and deferred until Tuesday, February 27, at 5:30 p.m.

Finance

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Mr. Speaker, I have the honour to present in both official languages, the Thirteenth Report of the Standing Committee on Finance in relation to Bill C-37, An Act to amend the law governing financial institutions and to provide for related and consequential matters, with amendments.

I would like to thank all the members for handling the bill expeditiously and allowing me to chair the committee once again.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Thank you, Mr. Chairman.

The bill here, Bill C-37, amends the financial institutions statutes to allow certain entities to act as mutual fund trustees. In light of recent comments from stakeholders, we have concerns that the proposed language could be overly restrictive and as such not fully convey our policy intent.

This amendment would add a fifth category--investment counselling and portfolio management services--of entities that would qualify for our proposed exemption to act as a trustee of a mutual fund. The amendment would also edit the language of the provision in order to more accurately reflect the policy intent of allowing these entities to be engaged in a combination of some of the permitted business activities.

Both these changes would reflect current market practices and are in line with our policy on trustees of mutual funds.

[The Vice-Chair, Liberal, Massimo Pacetti]

Just so that everybody knows, this one does not have a reference number, but it's circled number 5 in your package, and on the right-hand side it says Bill C-37, clause 31, pages 15 and 16.

[Marc Toupin, Procedural Clerk]

Mr. Chairman, as you've basically just indicated, it's a very simple rule. It's referred to as the “parent act rule”. The proposed amendment would have modified a portion of the statute that is not being amended by Bill C-37. That kind of amendment, according to our rules, is not admissible.

[The Vice-Chair, Liberal, Massimo Pacetti]

Good morning. We're going to try starting.

We don't have the ordre du jour because it's apparently 20-something pages long, so it's being photocopied. I suggest that we start and then we'll try to do this with the least amount of pain as possible.

Can I get the unanimous consent from everybody that I refer the bill to the House? Just joking.

We're going to try to take the amendments one at a time.

We're here pursuant to the order of reference of Thursday, December 7, 2006, Bill C-37, an act to amend the law governing financial institutions and to provide for related and consequential matters. We're here for clause-by-clause.

There are no amendments for clauses 1 to 19. Can we move that clauses 1 to 19 be adopted?

(Clauses 1 to 19 inclusive agreed to)

(On clause 20)

[Guy Legault, President and Chief Executive Officer, Canadian Payments Association]

Mr. Chairman, I would like to thank you as well as the other members of the committee for giving me the opportunity to meet with you today.

Before I start, I would like on behalf of the Canadian Payments Association to commend the Department of Finance for all its work done in respect of this bill, notably the draft amendments to the Bills of Exchange Act and the Canadian Payments Act.

The CPA is a member-based organization created by an act of Parliament in 1980. Today we have 120 members, including the Bank of Canada, chartered banks, trust and loan companies, credit union and caisses populaires central offices, and other deposit-taking institutions.

The CPA's mandate is to establish and operate Canada's national clearing and settlement system, a system vital to the Canadian economy. However, the CPA does not see or physically touch any individual payment in the clearing system; rather, it establishes the common framework of rules and procedures that govern the daily exchange of payments between financial institutions. At the end of each day, CPA systems determine the net positions between financial institutions, so that they are able to settle across their accounts at the Bank of Canada.

The Canadian Payments Act also establishes public policy objectives for the association, namely the promotion of a safe, sound, and efficient clearing and settlement system that takes into account the interests of its users. Indeed, the CPA has a stakeholder advisory council composed of 20 payment-system users and service providers, including consumer groups, industry associations, and government, to name a few.

The CPA is governed by a 16-person board of directors, including three directors appointed by the Minister of Finance; the chair; an appointee of the Bank of Canada; and the remainder appointed by members. The CPA is under the oversight of the Minister of Finance, who has disapproval powers over all of our rules. In addition, the Bank of Canada has oversight over our large-value transfer system, which has been designated as systemically important by the governor.

Despite the availability of new payment services and technologies, paper cheques remain a very convenient means of payment for Canadians and businesses, resulting in approximately five million cheques being physically transported and exchanged between financial institutions each business day.

The modernization of the current cheque-clearing process through the use of cheque-imaging technology will continue to support this vital payment instrument for Canadians.

Image-based clearing will allow for electronic cheque clearing, which will enhance the speed and efficiency of the cheque clearing system. It will also make the clearing system more robust by reducing its dependence on transportation networks and its vulnerability to related delays. Moreover, this modernization of Canada's cheque clearing system will allow it to keep pace with an international shift towards electronic clearing processes for cheques, particularly those in the United States and in France.

Imaging and electronic clearing of cheques will also help in the fight against fraud. Image-based clearing will shorten the clearing cycle, reducing the window of time that cheque fraudsters generally exploit. It will help financial institutions and their customers detect fraud attempts faster and improve their chances of preventing loss. It will also enable enhancements to the automated systems and tools that already account for the majority of fraud detection today. Further, to ensure integrity and privacy of images throughout their life cycle, a framework for security and a sound audit trail has been developed.

To facilitate a smooth transition to the cheque-imaging environment, the CPA and its members have been consulting broadly with a wide range of stakeholders, including consumer groups, large and small business organizations, law enforcement agencies, auditing bodies, the legal community, and service providers.

Further, the response from credit union consumers and businesses that have been receiving image-based services for some time has been very positive. Among the benefits most frequently cited by customers are more convenient and efficient record-keeping, easier account reconciliation, and more timely access to information about cheques.

In conclusion, we are very pleased overall with the proposals put forward by the government in setting out the legislative framework to support the cheque imaging initiative and to improve the association's governance and operations through amendments to the Bills of Exchange Act and the Canadian Payments Act.

I understand there's been some discussion regarding electronic payments and bill payments at this committee recently. I recognize that these matters fall outside of the scope of Bill C-37's review. My colleagues and I, however, would be happy to come back at a future date to address any issues you many have.

I thank you and I am now ready to answer your questions.

[Julie Dickson, Acting Superintendent, Financial Institutions, Office of the Superintendent of Financial Institutions Canada]

Good afternoon, Mr. Chairman and members of the committee.

Thank you for inviting the Office of the Superintendent of Financial Institutions (OSFI) to appear before you today to discuss Bill C-37.

The Office of the Superintendent of Financial Institutions is the prudential regulator of federal financial institutions. Prudential means we are concerned with the safety and soundness of financial institutions, which contributes to the overall stability of the financial system. Our mandate does not extend to market conduct or consumer-related issues, which are the responsibility of other organizations both at the federal and provincial levels.

In short, OSFI supervises federal financial institutions to determine whether they are in sound financial condition and complying with legislation. We are required to advise promptly in situations where there are material deficiencies affecting safety and soundness, and to take, or require management and boards of directors to take, necessary corrective measures in an expeditious fashion.

We also promote the adoption of policies and procedures to control and manage risk with financial institutions, and monitor and evaluate systemwide or sectoral issues that may impact institutions negatively.

Regular legislative reviews provide an opportunity to ensure that Canadian legislation promotes an efficient, competitive, and safe financial services sector. In any legislative review, OSFI is interested in the following: first, whether proposed legislative changes increase risk to financial institutions, thus creating major prudential concerns; second, whether the legislation is clear, because we administer compliance with most provisions of the act; third, whether OSFI has the authority it needs to act when necessary, so whether the prudential tool kit needs to be enhanced; and lastly, whether the regulatory burden can be eliminated in cases where it is clear that legislative requirements, which may have been necessary at one point in time, are no longer necessary from a prudential perspective.

In our judgment, Bill C-37 does not increase risk to the financial institutions we regulate. Further, Canada already has a framework with prudential tools that are consistent with international norms for strong regulatory regimes, thanks to changes introduced in previous legislative reviews.

As a result, OSFI did not seek significant new prudential measures as part of this review. However, there are several elements in Bill C-37 that would help us to be more effective, because they would bring clarity to certain areas of the act that we administer, and would eliminate some legislative requirements that are no longer considered useful, thus cutting red tape and regulatory burden.

A strong and efficient regulatory framework, one in which Canadians and those outside Canada can have a high degree of confidence, is critical to Canada's economic performance. In the opinion of OSFI, passage of Bill C-37 would help contribute to that confidence.

I would be pleased to answer any questions that the committee members may have.

Thank you.

[Richard Bouchard, As an Individual]

Good afternoon, Mr. Chairman, ladies and gentlemen of the committee. Thank you for giving me this opportunity as a citizen to share my fears with you, my fears about Bill C-37 and its repercussions on consumer protection.

First of all, I would like to explain how I myself went through the existing complaints processing system. To make a long story short, after an issue with the CIBC, I filed a complaint on October 4, 2005, in accordance with the steps described on the CIBC website. Their internal process took me as far as the CIBC ombudsman's office, who told me that he could do nothing for me.

In the meantime, I had notified both the President and Vice-President of the CIBC that I had identified failures to comply with the code of conduct and compliance, under the Sarbanes-Oxley Act. The initial idea was to notify the persons in question so that they could intervene. There was failure to comply with the code of conduct, but obviously that is my opinion.

Since nothing was happening, on December 2, I finally demanded that my file be transferred to the OBSI, the Ombudsman for Banking Services and Investments. The OBSI did not acknowledge receiving my file until December 21. On January 24, the OBSI notified me that he would investigate. Between December 21 and January 24, I was given no information at all. The OBSI conducted his investigation. On receiving the OBSI's draft recommendation, which included an investigation report, I contacted Mr. McCaughey, the President of the CIBC, once again to tell him that there was now evidence that my allegations were well-founded. I asked him what he planned to do. Mr. McCaughey answered, and I quote: "I regret to tell you that you have used all the available complaints management resources. This is the last answer you will receive on the issue."

At that point, I had no choice: either I had to accept the OBSI's recommendation, or declare personal bankruptcy and start again from scratch. The company was already bankrupt. At present, no regulations have come into play with the CIBC. During the entire affair, which has been going on since October 4, 2005, I have been keenly interested in the concept of self-regulation. Basically, voluntary codes are codes of self-regulation.

Allow me to summarize what I have discovered. In the McGill Law Journal, Marc Lacoursière, an attorney and professor at the Université Laval Faculty of Law, said, and I quote:

Financial institutions, which have become involved in the formulation of these principles...

These principles are the code of conduct.

...seem to shirk off their responsibilities rather easily. In view of the banking transactions that occur overseas, the theory of self-regulation is difficult to impose. Any foreign bank that provides banking services over the Internet, with no physical link to Canada can easily circumvent the Banking Act and its numerous limitations [...] since there is no way to enforce the legislation, foreign banks may well not be interested in complying with the organization's guidelines.

Mr. Lacoursière also refers to another European study carried out with a view to implementing ombudsman systems in the EU. The study was conducted by Lex Fori, an international law firm. It concludes:

Among instruments of "soft law..."

Since self-regulation is considered a form of soft law...

...some give better results than others. One of those is co-regulation, in the broader sense, which implies the involvement of public authorities in addition to the involvement of professionals and consumers. By contrast, self-regulation has shown itself, with a few notable exceptions, to be the most frequently disappointing instrument insofar as it is frequently no more than a list of good intentions.

That is the conclusion. Those studies are not new. And as a consumer, I can conclude that the conduct of banks has been reported to authorities for a long time now, but that the banks do not seem very interested in protecting consumers.

The Minister of Finance, during the second debate—

[Jim Callon, Acting Commissioner, Financial Consumer Agency of Canada]

Good afternoon, Mr. Chairman. I thank you and the Finance Committee for inviting the Financial Consumer Agency of Canada, the FCAC. As we are short of time, and as the chairman requested, I will make my opening statement as brief as I can.

This afternoon, I will discuss the mandate and the role of the agency, in the context of Bill C-37. Afterward, I will be pleased to answer all of your questions.

FCAC's mandate is set out in the FCAC Act and can be summed up succinctly by saying that we protect and inform Canadians with respect to the financial sector. Parliament, in establishing the financial consumer protection framework, clearly separated the concept of individual consumer redress from the enforcement of the law. The ombud services were in part a response to Parliament's desire that all financial institutions belong to an independent third-party dispute resolution body that would provide redress for individual consumers, based on fairness.

Rather, FCAC focuses on law enforcement, addressing issues and making improvements in the public interest. As a market-conduct regulator, our ultimate objective is to encourage a fair and competitive marketplace. We make sure that financial institutions meet their obligations to consumers, as outlined in the federal statutes. In some cases, a compliance decision can affect hundreds of thousands of consumers. When we deal with individual consumers seeking redress, we provide them with the tools and information they need and we'll refer them to the complaint-handling processes provided by their financial institution.

Where regulatory action is required, the agency undertakes investigations and examinations. When addressing problems with compliance with the law, the legislation provides the commissioner with options in terms of how best to address the matter. The commissioner may enter into a binding compliance agreement that requires financial institutions to take actions to improve their level of compliance with the law. The commissioner may initiate a legal process for determining if an institution has committed a violation, and, where appropriate, impose an administrative penalty up to $100,000. That decision is subject to court appeal. And if you note, Bill C-37 proposes to increase this to $200,000. After finding a violation, the commissioner has the discretion to publicize the nature of the violation, the name of the person who committed it, and the amount of the penalty imposed.

With respect to our consumer education mandate, FCAC informs consumers about their rights and responsibilities when dealing with financial institutions. We provide objective and timely information to help Canadians understand and shop around for day-to-day financial services and products. Our publications and online interactive tools provide information on financial products and services such as credit cards, mortgages, and bank accounts. By addressing the information gaps that exist in the marketplace, FCAC provides Canadians with the tools they need to help them navigate the financial marketplace.

Demand for our services is growing. Every year, thousands of Canadians come to us to obtain information or to register a complaint about a financial institution. Since 2001 FCAC has received more than 123,000 phone calls, e-mails, and letters from Canadians. Last year, in 2005-06, we distributed more than 450,000 publications across the country. Our website has become one of Canada's best sources of objective, up-to-date information on financial products and services. Since 2002 the number of visits to our website has increased by 69% each year. This year our website has already reached 1.1 million visits for the first nine months of the year. Through our outreach program, FCAC is working closely with a growing number of partners to increase our reach and awareness of the agency among consumers. For example, this past year our partnership with Canada Revenue Agency helped us reach over six million consumers directly through inserts with Government of Canada cheques.

Finally, with respect to Bill C-37, FCAC will be responsible for enforcing all the key consumer-related changes that are being proposed to the current legislative framework. And in keeping with the agency's broad consumer-education mandate, the FCAC will continue to be proactive in informing consumers of the changes being made by this broader legislative review.

In closing, I would like to thank you for the opportunity to appear before the committee. I look forward to answering any of your questions.

[The Vice-Chair, Liberal, Massimo Pacetti]

We have before us, pursuant to the Order of Reference of Thursday, December 17, 2006, Bill C-37, An Act to amend the law governing financial institutions and to provide for related consequential matters.

I think that most of you know how this works. I give you five minutes for preliminary statements. Let us begin with the witnesses on this list. First, let us hear the Canadian Association of Mutual Insurance Companies.

Mr. Lafrenière, welcome. You have five minutes, please.

[Pierre Paquette, Bloc, Joliette, QC]

You know that the Bloc Québécois, in the person of Réal Ménard, introduced a bill on community reinvestment. I do not know whether you are familiar with that bill.

Is that the type of approach that you would like to see? Could that be included in changes to Bill C-37?

[Duff Conacher, Chairperson, Canadian Community Reinvestment Coalition]

Thank you very much to the committee for this opportunity to present on Bill C-37.

The Canadian Community Reinvestment Coalition, which I chair, is a coalition of a hundred anti-poverty, community economic development, consumer, labour, and citizen groups that represent, in total membership, more than 3 million Canadians. As a coalition, it has been advocating increased bank accountability and consumer protection for ten years now.

The coalition is concerned about key gaps in Bill C-37 that have been continued in federal financial institution laws for many years. Citizen groups and consumer groups have been pointing to these gaps for more than a decade, but the gaps have still not been closed. It's a serious situation, because according to 90% of Canadians, access to basic banking service is an essential service—as essential as heat, hydro, or other home services that essentially allow people to live in society.

At the same time, the market share controlled by the big banks in Canada in most main service categories in most parts of the country is higher than in most industrialized countries. As one former head of the Federal Trade Commission in the U.S. believes, the record profits of the banks are proof enough of excess market share controlled by too few players in the market.

At the same time, the watchdog agencies watching financial institutions in terms of accountability and consumer protection lack either independence, resources, or a strong enforcement attitude and record. As a result, financial consumers are essentially on their own and up against very powerful, well-resourced financial institutions when shopping for, dealing with, or complaining about financial institution services.

While the past twenty years of response from the federal government have largely seen inaction, there was somewhat of a breakthrough with Bill C-8 in 2001. However, the measures in Bill C-8 all contain key loopholes that undermine the effectiveness of the measures. As a result, in 2007, the 20 million Canadian financial consumers, especially of banking services, lack key protections. Equally, Canadian banks lack key accountability requirements that have been in place in the U.S. and other countries for ten to twenty years.

The first area--of ten--about which the Canadian Community Reinvestment Coalition is concerned is that of the public accountability statements that now have to be produced by federally regulated financial institutions annually. These public accountability statements pale in comparison to the accountability statements that are required—now for over twenty years—to be produced by banks and other institutions in the U.S.

The big problem is that, unlike in the U.S., the statements do not require the banks to disclose detailed data on their service, lending, and investment records--in particular, demand for lending and investment and the response by each bank, broken down on a neighbourhood basis and by characteristics of borrowers. As a result, it's impossible to tell what the lending, service, and investment record is of any bank in Canada.

At the same time, we are allowing the banks to grow, take over lots of institutions, and possibly merge in the future. With each takeover, as the banks get larger, we're not able to measure whether their service gets better or worse as they get bigger.

In the U.S., the essential rule is that if you're a bank with a bad record, you're not allowed to get bigger. It's just common sense. Why would you want a bank that has a bad service, lending, or investment record to get bigger? Then they're just going to serve more people poorly or continue to increase the discrimination in lending or other unfair lending practices.

As part of the accountability statements being strengthened so that they become more detailed, we also propose that the government would regularly review these statements and grade them, as is done in the U.S., and that growing as a financial institution would be conditional on having a good service, lending, and investment record. This is what has been done in the U.S. for more than twenty years.

A second accountability measure that we propose to be put in place is that government should not contract to financial institutions that have poor service, lending, or investment records. A mandatory condition for bidding on all federal government contracts should be that the institution can show it has had a good record every year for the previous ten years.

Right now the federal government hands out tens of millions of dollars of business to federal financial institutions and requests nothing in return. This is a leverage point, an incentive that can be used very effectively, as it has been used in other areas, to ensure that the banks have a good record and serve every Canadian fairly and well.

I'll turn now to a specific provision in Bill C-37, which is a loophole that was left by Bill C-8, and that is the policies that were required by the banks in terms of holds on cheques. Bill C-8 required only that the banks have a policy. The policy that they've put in place is that you get access to the money you deposit by cheque ten days after you deposit it.

For people with low incomes, that means they'll never open a bank account because they can't wait for their money for ten days. Bill C-37 reduces this cheque-hold period to only four to seven days, but 98% of cheques clear overnight. Our proposal is that this measure be amended so that depositors will have a right to access funds from a deposited cheque the day after the cheque is deposited.

To go through some of the other measures quickly, the Financial Consumer Agency of Canada is not allowed to name an institution that violates the law unless the institution is prosecuted by the agency. The agency has prosecuted only two institutions in the past five years. All of the rest that have violated the law remain unnamed, and as a result, Canadians have no idea which institutions have a good record or not. The agency needs to be required to penalize and name violators in every case that they find a violation.

As well, the Financial Services Ombudsman needs to be made much more independent and have binding powers. The federal government should not have let the industry set up its own ombudsman, but should have, as Bill C-8 set out, set up the ombudsman itself as a government-run body that would ensure independence and fairness in the operations, and given the body the power to order financial institutions to remedy unfair treatment.