Bill C-28 (Historical)

Financial Literacy Leader Act

An Act to amend the Financial Consumer Agency of Canada Act

This enactment amends the Financial Consumer Agency of Canada Act to create the position of Financial Literacy Leader within the Agency. The Leader is to be appointed by the Governor in Council to exercise leadership at the national level to strengthen the financial literacy of Canadians. The amendments also provide for the other powers, duties and functions of the Financial Literacy Leader.

Financial Literacy Leader Act

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Mr. Speaker, I will start off by looking at the problems the national task force on financial literacy had from the very beginning.

First, it was headed by a former banker. I have nothing against bankers. My mother was a banker. She worked as a bank manager for the Bank of Montreal for over 35 years. She worked in human resources. I had an aunt who worked for the Bank of Montreal for the same period of time. My mom's friends worked for a bank. I am familiar with bankers and I have no problem with them.

The raison d'être of bankers is to market financial products. I know this because I lived in a banking family. Bankers sell financial products. There are certain marketing seasons when they sell RRSPs or different financial products. They have quotas. There are things that they have to sell. They are salespeople. That is their raison d'être. Often the financial products that they sell to consumers increase the profits of their institutions.

That is not a balanced way to start a group dedicated to the idea of financial literacy. It is similar to putting McDonald's in charge of nutrition policies. It is not a balanced way to do things.

Members know as well as I do that consumers sometimes get burned by financial products because they do not quite understand them. A case in point is the RESP.

I want to make a transparent declaration to the House. When I was in my early thirties and took out an RESP for my daughter, I did not quite understand what I was getting into. The marketing material made it look like I could squirrel away money for my daughter and by the time she was 18 there would be enough money for her university education. I was conscious of the fact that when she did reach university age it would be quite expensive to put her through post-secondary education with the rising costs of education and the rising costs of living. I was really scared and I wanted to find a financial product that would allow me to pay for her education without any worries.

What I did not know was that I could lose that money easily. Call me a fool, but I did not know that the RESP would lose so much money when the market took a dive. My mother the banker did not tell me that fact either until I had lost half the value during the downturn in 2008. There was $12,000 in that plan and it went down to about $5,000 or $6,000. I worked hard to put that money aside. I believed that I was doing the right thing. The bank told me I was doing the right thing. The government told me I was doing the right thing. I believed them.

What we need in terms of financial literacy is somebody who will tell the people of Canada the whole truth, not just the marketing truth.

The Minister of Finance denied that we were in a downturn until the very end of 2008, but I felt it much earlier. I remember the government initiatives to boost people's contributions to RESPs in 2006 and 2007. There was quite a marketing drive by the banks and government. They were telling people to put their money into RESPs so that their kids could go to school.

I am sure people will say that I was a fool not to know how it worked before I put my money in the RESP. With raising a child, working full-time, taking care of my family, I did not have the time to sit down and look at what the RESP was about. It was never taught to me in high school. It was never taught to me in university. I was to teach myself from the bank's own marketing products and from the government literature. None of those things told me that I could lose my money just like that.

I know I am not alone in that. I know there are plenty of Canadians out there who have gone through similar experiences to me. Therefore, as much as we might say that I am a fool, if I am a fool, thousands of Canadians are fools. They need help understanding these financial products.

Francophones may find it even more difficult to learn about these financial products through this group because bilingualism is not a requirement for the position of financial literacy leader. Obviously, what the government wants to do is create a single consumer protection agency. However, that is not really within the purview of this bill. Consumer protection is not really included in the bill.

Instead, I would like to talk about one of the greatest problems for Canadians: savings.

If we are looking at the issue of financial literacy, I must agree with my colleague in the third party who said that the financial leader of the government was not quite literate, because we have serious problems. One of those serious problems is the savings of Canadians and it is one of the things that is effecting the competitiveness of our economy.

The former governor of the Bank of Canada said, in a report quite a while ago, that Canadians needed to save more. He said that they needed to save between 10% and 21% of their pre-tax income each year and that they needed to save consistently for 35 years to have comfortable retirement incomes.

According to a report prepared by the C.D. Howe Institute, which is not exactly a socialist organization, people who earn between $42,000 a year and $150,000 a year need to save between 11% and 21%.

What I see in Bill C-28 is the creation of a group that will try to market financial products, like credit cards, RRSPs and RESPs, without fully explaining what those products do or explaining it in a way that will promote those products to promote the profits of those institutions and banks. I do not think that is the way to teach Canadians how to be financially literate. We need to find a way for Canadians to save more money.

The Conference Board of Canada, looking at the World Economic Forum's 2011 report on competitiveness, said that Canada's macroeconomic environment rankings were weak. It said that a number of fiscal pressures were restricting Canada's economy from achieving its full potential. For example, Canada ranked 80th in terms of its gross national savings as a percentage of GDP and a lowly 129th out of 142 countries in terms of its overall government debt levels as a percentage of GDP.

It is clear that we need to help Canadians become financially literate but that starts with telling them to save more and finding efficient ways for them to save without marketing these financial products to them. I do not think the task force would be able to sufficiently explain these financial products to Canadians when it is obvious that the composition of the board would be compromised in that it would not be necessary for the head of the task force to be bilingual.

I have problems with the bill. I do not think it would do what the government states it would do, which is increase financial literacy. We need to take a serious look at how we can actually improve the financial literacy of Canadians. Looking at the statistics, I can see that we have a long way to go.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Mr. Speaker, my colleague said something toward the end of his speech, which I hope I did not hear correctly. Was the member saying that the financial literacy leader and his or her office would be marketing and selling products to Canadians?

Clearly, that is ridiculous. That is not the job or the mandate of that person or that office. That is done by financial institutions, by people who have the expertise. He explained that he had some problems with his RESP, which is too bad, but, having been in the business for a number of years, a good financial advisor is essential.

Could the member clarify whether he thinks that this office would actually be marketing and selling products?

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Mr. Speaker, no. What I was implying was that, because of the composition of the working group being mostly former bankers, having their raison d'être for their careers the marketing of financial products, they would be amenable to not fully explaining these products.

I was not implying that they would be selling these products. However, they will have done that in their careers, that will be what they know and it will not be in their interests to steer Canadians away from products that might not give the results their former institutions promised in the past.

[Claude Gravelle, NDP, Nickel Belt, ON]

Mr. Speaker, I commend my colleague from Vaudreuil—Soulanges for his excellent speech. During his speech he mentioned the word “fool” a couple of times. I certainly would not call him a fool but I would call this bill a foolish bill.

He also talked about poverty and about trying to save for RRSPs. I know that is very difficult. I know a lot of seniors are living in poverty right now because when they were raising their kids they could not put money aside for their retirement.

Would it not have been a better idea if the government had invested in the Canada-Quebec pension plan to help people, especially seniors, who are living in poverty?

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Mr. Speaker, I do believe that if we were to invest more in our CPP and QPP, if we were to beef that up, Canadians would find more money at the end of their careers when they retire.

I mentioned that my mother worked for over 30 years for the Bank of Montreal and believed in all the financial products that she sold. She was quite a fan. However, in her retirement now, I am helping her out with the day to day, simply because she could not save enough money during her career, even with all the financial products that she used, for her retirement.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Mr. Speaker, I congratulate my colleague from Vaudreuil-Soulanges for making his speech very relevant. I would also like to reassure him right away. Although he had an unfortunate experience with his RESP, he is not less intelligent than the average person. Mr. Rousseau, the former CEO of the Caisse de dépôt et placement du Québec and a former CEO of the Laurentian Bank, also admitted that he does not understand the ultra-sophisticated savings products that led to the 2008 crisis.

Now the government is introducing a defined contribution pension plan, which also has pitfalls similar to those of the product central to my colleague's unfortunate experience. What does he think of the government's ability to assess financial literacy? Is it qualified to do so?

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Mr. Speaker, I thank the member for the question. When I spoke candidly, I heard someone on the government side say that they could see why I had lost my money. That says a lot about the government's attitude. It is saying that if we lose our money and are poor, it is our own fault. The government will carry on with its agenda. It will make one group of people rich and not care about the rest. That is completely unacceptable. We must protect both the poor and the rich of this country.

[The Acting Speaker, Conservative, Barry Devolin]

Resuming debate. The hon. member for Abitibi—Témiscamingue has six minutes remaining.

[Christine Moore, NDP, Abitibi—Témiscamingue, QC]

Mr. Speaker, we cannot talk about this bill without a clear understanding of what happened in the beginning. In budget 2009, the Minister of Finance created a national task force that was mandated to provide the minister with advice on the issue of financial literacy. So the group went to work. It was made up of various stakeholders from different sectors, including workers, volunteers and teachers, as well as people from the business and financial sectors.

The task force submitted a report containing 30 recommendations. One recommendation was to create the position of financial literacy leader. This bill completely disregards all the other recommendations. To me, that does not make any sense. The report gave 30 recommendations and the government adopted only one of them.

Furthermore, this bill could have described very concrete measures. For instance, one of the recommendations was this:

The task force recommends that the Government of Canada, as part of the 2011–12 renewal of its urban aboriginal strategy...make financial literacy training programs for young aboriginal Canadians eligible for funding.

This could have been a concrete recommendation in terms of financial literacy and it could have helped. We all know that aboriginal youth and aboriginal communities have problems stemming from poverty.

Often, one of the problems, when we talk about financial literacy, is that they do not understand the terms accurately. If someone needs to buy a car and does not understand the actual terms of their loan, they go into debt and go bankrupt. If they use a credit card to buy food, but they do not have a good grasp on financial literacy, they have the impression they are paying 10% interest when really it is 28%, because sometimes the advertising is hard to understand. I think help is not being given.

So this is a community that could have been targeted for this. The task force also recommended that the government of Canada provide recent immigrants with financial information and education services tailored to their needs, as part of the orientation services offered both abroad and in Canada by the Immigrant Settlement and Adaptation Program and the language instruction for newcomers to Canada. So this is another group that could have been targeted, but that has absolutely ignored. Those recommendations are not taken into account in the bill.

Some of these immigrants are coming from countries like Africa where, and I apologize for the expression, about 1% of the population has a credit card and a debit card and where bartering is still done with food and that sort of thing. They also use cash, but they still use the barter system. They find themselves in Canada, with a system that involves handling a mountain of paperwork and where they may not understand the language very well. They may not have a significant level of education, and they find themselves in this kind of system and having to manage to understand. They have to understand an income tax system, which is entirely new to them.

The government is choosing to target only the financial literacy leader, instead of applying a recommendation like that one, which could have been more concrete. I do not understand the priorities; it is impossible to understand. When they have 30 excellent recommendations and they choose not to pay attention to them, that seems to me to be rather unusual.

The possibility was also recommended of working side-by-side with provincial and territorial governments in order to provide teachers with the tools they need to teach financial literacy to children and to their students. If financial literacy is taught gradually and in a language that is familiar to children, teenagers, college and university students, there is a chance that they will understand it. That could, therefore, be the way forward. It could facilitate a beneficial exchange between provinces, so that teachers are able to teach the material and have the tools they need at their disposal, instead of having to invent them. That was another recommendation.

It was also recommended that employers be able to offer financial literacy training, so that their employees fully understand, for example, their pension programs and the importance of investing in an RRSP. But this recommendation has not been followed. That strikes me as incomprehensible. In my opinion, budgets and key recommendations should have been the focus of this bill.

Granted, the bill creates the position of financial literacy leader, but it is just as essential ti implement the key recommendations, and it is crucial, as of now, to take into account these recommendations, and that things do not drag on. Otherwise, the work of the task force will largely fall short of its objective.

In my opinion, this smacks of a lack of logic and a failure to adequately prioritize. Positions should not be created without prior knowledge of the objectives, without knowing how to proceed, and what the priorities are for implementation. There needs to be some direction when that kind of position is created, otherwise it is tantamount to sending a cheque to a senior official who is acting rudderlessly.

[The Acting Speaker, Conservative, Barry Devolin]

It being 5:30 p.m., the House will now proceed to the consideration of private members' business as listed on today's order paper.

The House resumed from March 1 consideration of the motion that Bill C-28, An Act to amend the Financial Consumer Agency of Canada Act, be read the second time and referred to a committee, and of the motion that this question be now put.

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

Mr. Speaker, it is with pleasure that I participate in the debate on this bill in the sense that financial issues are something which all Canadians are concerned about. The direction in which the government is going and the sense of commitment in terms of education on financial matters are something that we should all have concerns about.

It was not long ago when the U.S. took a nosedive. Many economists did their best in trying to explain the circumstances that led to it. When I reflect on the discussions that I had with constituents from, at that time, Inkster, but all residents of Winnipeg North, many of those discussions pertained to what we thought had taken place that caused the American economy to take that radical turn. As people will recall, the price of housing dropped quite dramatically in certain areas of the United States and there was a great deal of speculation as to why. Many individuals sat around the table in discussion groups and we talked about the American debt, loans and mortgages, and the way in which housing was being financed in the U.S. I raise that because there is a general need for us to appreciate how important it is that the population as a whole has a sense of how finances are administered, both at the micro-level and the macro-level.

There was a time when going through school we had a basic economics class and that was it. There was nothing more to trying to understand finances. Today, depending on the high school one goes to or even in elementary schools, we are starting to see more interest and education in that field. That is something which we think is a good thing because the economy and the way in which we manage our financial affairs is so important. If we look at the types of decisions we need to make, the better informed and educated the population is on financial matters it is at the end of the day better for government.

An example for which people could get a good sense of an appreciation is the issue of retirement. The amount of financial planning to be considered for retirement is significant. When I was a bit younger, 25 years ago or so, first getting elected when I was 26, a pension was not an issue for me personally. I never thought about pensions. There were other bigger, broader pictures that I wanted to think about, at least at that stage in my life, and I think many of my peers would have thought likewise. When we are 25, we are not thinking of retirement but it is critically important for us to be thinking about that. Upon reflection and with hindsight, there are a number of things that I would have done differently.

We need to look at the role that government needs to play from both the consumers' perspective and the government's perspective. We need to bring it to the government. The government appears to be on the brink of making a decision to reduce the benefits for old age supplement. People who are 55 years old today will not be able to retire when they hit 67.

If we go to that generation, many individuals in the workforce, some of it very labour intense and other aspects of it requiring people to work as lawyers or whatever it might be, planned on the 65 retirement age. Once people start hitting the age of 40 or 45, they start thinking more about retirement and then bank accordingly. People need to learn what it is they need to do in order to retire at age 65. There is that learning curve.

We need to recognize that there are hundreds of thousands of people who will be affected by the anticipated decision by the government to increase that age. As a result, it will have an impact on the finances of many Canadians across Canada as they will need to start reviewing what sort of retirement funds they will have. They reflect on their homes and where they are investing their moneys today. A lot of people are on fairly tight budgets but they know they will need to increase their RRSPs if they still want to retire at age 65 to bridge the gap between 65 and 67, something we hear a great deal about from the government. People may not necessarily have the same sort of cash flow as they once would have had or they may have allocated their disposable income and it will be difficult for them to generate the type of resources they will require in order to continue with their plans to retire at age 65. There are many different options for people to be exploring at a younger age. That is just one component.

To bring it around to housing, people need to have a good understanding of the housing market and how it relates compared to mortgage rates. It was not that long ago, in the late 1970s, when there were skyrocketing mortgage rates on homes. It was in and around 18% or 19%. We can talk about a relatively small amount of money being financed in order to own a home, but when it is rated at somewhere around 18% or 19%, it takes away a good chunk of a person's disposable income.

Over the last 20 years, if we look at interest rates, they have been considerably better than what they were during the 1970s. As a result, more middle-class Canadians are buying homes that cost $250,000 or $300,000 and they can afford it because interest rates are so low in comparison to the 1970s in particular, but also the 1980s. If the interest rate today were to go up two or three points, we can only imagine the profound impact that would have on thousands of families across Canada. When people finance homes for $300,000, it is often two people working in order to support their lifestyle in that house.

I have had opportunities to have discussions with individuals who are in that sort of situation. Their homes are their futures and they are literally banking on it. People get mortgages for 25 or 30 years nowadays with an interest rate of 4% or 5% and two individuals are working. We can only think of the impact if the interest rate were to go up by two points. They would not have the disposable income, for the most part, in order to address that.

There is a great deal of pressure, whether it is on the Bank of Canada or on the government, to be cognizant of the interest rate because of the impact it would have on consumers and their life savings. The home can be the single greatest expenditure that people have.

We could continue talking about other types of expenditures by consumers, individuals who go out and purchase large ticket items, such as vehicles. They are brought in, in good part, because of low interest rates.

When we talk about financial literacy, it is a disseminating of information that will ensure there is better overall education for all Canadians. I think that could be done in many different ways.

On the surface, the bill looks great. We all support financial literacy and moving in that direction is something we want to encourage and promote. In essence, the government is saying that it will create an office of sorts and there will to be a reporting mechanism for this particular officer.

Within the Liberal Party, we see financial literacy as a major issue. Therefore, we are wondering why the government is not providing a better definition of exactly what it is it is proposing with the legislation. What sort of a budget are we talking about? I believe it is a bit vague or unclear in terms of where and how it might reach out into our communities.

I believe the provinces have a critical role to play in this discussion. To what degree has the federal government worked in co-operation with the provinces to ensure we are moving in the right direction? At the provincial level, we could go right into the schools, which could involve the school trustees or administrators.

What I am suggesting is that there are many different stakeholders who have a vested interest in trying to do what this bill is hoping to do, which is to achieve a higher level of financial literacy. To what degree has the government done consultations to bring forward legislation that is all-encompassing and that will provide for a better level of literacy for all Canadians?

In my short time in the House, I have found that there is a different attitude from the present government and the way in which it approaches public policy compared to members on the opposition benches, in particular with regard to the Liberal Party. We in the Liberal Party believe that the national government has a strong role to play. I would suggest that it is a leadership role in trying to ensure that there are standards across the nation and that we have something that reaches out in a co-operative manner, supporting provincial and other initiatives where we can.

I believe the gambit is wide, which is why it would have been good to have received some sense of a commitment from the government as to how much money it is prepared to commit to a commissioner of this nature. What sort of office will it be? The government may be looking at the possibility of the banking industry having to cover the cost of this new office or to facilitate the needs of this particular legislation. However, we do not know what the dollar value of it is. We also do not know how the government will bring in the stakeholders with regard to this important issue.

I started off by talking about the financial crisis that occurred in the United States. It did not take long for people to get an appreciation of exactly what was taking place, how people had overextended themselves on loans and how the housing market and its artificially high prices led to the crash of the housing market. Ultimately, hundreds of thousands of Americans went bankrupt because of what the banking industry was unable to do, because of a lack of healthy, strong regulations.

In Canada, there was a great deal of pressure to allow for more deregulation of the banking industry. However, there were safeguards in place. During the nineties, individuals like Paul Martin and Jean Chrétien said that we needed to have regulation to ensure that mortgages did not become 40 or 50 years in duration. People learned a lot by watching the news and hearing how so many Americans were losing their homes. Canada was in good part able to avoid a lot of that because of good policy decisions made during the nineties.

This brings us back to the issue of what we can do to ensure that Canada's financial markets, industries and consumers are best protected. That is the reason we talk about the importance of education. That is really what it is all about. When I make reference to issues such as RRSPs, owning a home or making major purchases, we want citizens to be educated to make the best decisions possible. The only way we can achieve that is to ensure that there is some sort of an educational process regarding financial literacy from coast to coast. The greatest challenge the government has in regard to financial literacy across Canada is to demonstrate that it has a national, strong, healthy leadership role to play in this area. I am not convinced the government members believe they have to play that lead role.

I know some provinces have gone a long way in providing better consumer education on financial matters, from banking fees to cheque cashing stores. They have increased the level of consumer awareness. There are many initiatives which have been taken by individual provinces. This bill brings forward the idea of the need for the federal government to play a role in financial literacy. I would challenge the government to reflect on what degree it is prepared to say that Ottawa needs to get all of the stakeholders working together to ensure that a financial literacy office has teeth and the ability to make a difference.

[Dennis Bevington, NDP, Western Arctic, NT]

Mr. Speaker, I want to thank my colleague for his discussion on Bill C-28. I have some concerns about the bill, having dealt with the government for six years. Many times the government sets up straw dogs that really do not accomplish much. The government has established a commission to look into complaints for human rights and environmental conditions around Canadian mining companies in other countries. The commission has basically done nothing.

In this country, we need a lot of consumer protection and consumer information. Financial information is a very important part of that. It is a very complex field for Canadians to understand how to best use their financial system to their own benefit. We are talking about playing a game against people who have much larger and more elaborate plans. How can we guarantee that what is in this bill will actually deliver anything for Canadians?

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

Mr. Speaker, I see that the member shares my concern about the issue of leadership. Indeed, the government can put measures into legislation so that it can go around the country and say that it wants to play this role, but my concern is about what is in the bill. It is that real sense of commitment that we are looking for. I think that has been lacking from the national government.

There are issues within the financial industry that should be raising flags. People are concerned about interest rates on credit cards, user fees, banking fees and so forth. There is so much more that we could be doing.

I want to emphasize the leadership role of bringing all the stakeholders together. We need something more than just saying, “Here is a bill”. We want to say that we have passed the legislation. We want effective leadership on this particular front. At the end of the day, it saves our consumers, it provides for consumer confidence and it is better for the overall economy if the government is genuine. I just do not necessarily believe that the government is prepared to play that strong national leadership role. That is the biggest concern I have with respect to this bill.

[James Rajotte, Conservative, Edmonton—Leduc, AB]

Mr. Speaker, I am a little uncertain whether the member does support the concept of a financial literacy leader. I have noticed, since starting to work on this issue, the number of people across the country who are making an effort with respect to financial literacy, whether it is through non-governmental organizations, institutions or individually. They are asking for national leadership, which he pointed out in his speech. Therefore, they do want a financial literacy leader and they do want him or her to work with the Financial Consumer Agency of Canada.

Can the member clarify for the record if he supports this leader and does he support him or her working within the gamut of the Financial Consumer Agency of Canada?