Bill S-5 (Historical)

Financial System Review Act

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 reinforcing stability and fine-tuning the consumer-protection framework; and
(b) 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 Canada Deposit Insurance Corporation Act, the Canadian Payments Act, the Winding-up and Restructuring Act, the Office of the Superintendent of Financial Institutions Act, the Payment Clearing and Settlement Act and the Financial Consumer Agency of Canada Act.

Financial System Review Act

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

Madam Speaker, I can understand that the Conservatives want to create legal loopholes for the wealthy through their legislation, but why are they protecting the tax evaders? In this bill they have only touched upon going after tax evaders who use places like the Cayman Islands or Switzerland to hide their money from the Canadian tax man.

My question to the member is this. Why have we not been given sufficient time to discuss this issue in the legislation and to go after tax evaders? Why are they protecting tax evaders and what penalties do they intend to use in their small makeshift measures against tax evasion? What penalties are they going to impose and how are they going to enforce them in places like Cayman Islands and Switzerland?

[Devinder Shory, Conservative, Calgary Northeast, AB]

Madam Speaker, it is a good and fair question, but I want to remind my friend in the opposition that the process was started in September 2010, as far as the time is concerned.

We are asking the opposition today to let this bill go to committee where all of these issues are raised and addressed. That is the place where individual issues should be raised. As my colleague mentioned before, all these issues were in our election platform and Canadians gave us a strong mandate to work for them and to be productive, not to halt any and all legislation.

[Wayne Easter, Liberal, Malpeque, PE]

Madam Speaker, I am amazed at how that member and that party have tried to reinvent history. Yes, we have the soundest banking system in the world, but I can assure everyone it has nothing to do with the current Prime Minister. It goes back to 1995 when the finance minister of the day, Paul Martin, along with the then Prime Minister, was willing to allow mergers with the United States, but a committee of backbench Liberal MPs challenged its own government. I was one of them. We held hearings across this country and made a recommendation that the banks stay within Canada and not be allowed to merge. That is why we have the soundest banking system in the world, because MPs were willing to stand up against the government. It is too bad we do not see some standing up against the government by the backbench on the other side.

I do not really have a question but I am just asking the member to stop trying to reinvent history and to get the facts straight.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Madam Speaker, of course the member opposite is always amazed to see how hard working and productive this government is.

To respond to his comment, he has to admit one more thing, that it was under the leadership of this Prime Minister that Canada weathered the global economic crisis and emerged with the world's strongest banking sector, according to the World Economic Forum, and was given excellent ratings by the World Bank and IMF. It was our Conservative government that took a balanced approach between regulations and free markets that limited our need to intervene in the markets.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

Madam Speaker, I would like the member to reiterate quickly some of the aspects of the bill. This bill would in fact provide higher standards of accountability. I do not understand why the opposition party would be against a bill that requires greater accountability and more responsibility within the financial sector and in the area of consumer protection. Would the member not agree that is exactly what this bill would do?

[Devinder Shory, Conservative, Calgary Northeast, AB]

Madam Speaker, I absolutely agree with my colleague that the key measures in this act are aimed at protecting consumers of financial services. Of course, this is mandatory legislation. The statutes for federally regulated financial institutions must be reviewed every five years. That is exactly what we are doing.

For a change, I would ask all opposition members to get on board at least once and move forward and provide Canadians with what they deserve and have asked for.

[The Deputy Speaker, Denise Savoie]

I would just like to advise all members that we have now reached the point where interventions can last no more than 10 minutes, followed by questions and comments of 5 minutes. The hon. member for York South—Weston.

[Mike Sullivan, NDP, York South—Weston, ON]

Madam Speaker, I rise today to speak to Bill S-5, an act to amend the law governing financial institutions and to provide for related and consequential matters, and to express my disappointment about the inadequacies of this bill.

The member opposite suggested that somehow we were against this kind of thing. We are not against it: we are in fact disappointed that it does not go far enough. I think we have heard their mantra over and over again throughout this entire Parliament. We are disappointed that the government does not do enough, that it does not protect seniors and immigrants and does not protect the rights of ordinary Canadians.

Again we are faced with a bill that does not seem to go far enough. It is our hope that these inadequacies can be addressed at committee, as has been suggested. So far we have not had a good track record of changing bills at committee. Unfortunately the government does not like to listen to our advice, does not want to hear debate, and intends through the time allocation motion it introduced yesterday and passed today to have only one further day of debate before going to the standing committee, which will then have about five weeks to go through this very complicated bill.

I say “complicated” because the bill amends the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act, the Trust and Loan Companies Act, the Bank of Canada Act, the Canada Deposit Insurance Corporation Act, the Canadian Payments Act, the Winding-up and Restructuring Act, the Office of the Superintendent of Financial Institutions Act, the Payment Clearing and Settlement Act, and the Financial Consumer Agency of Canada Act. Why are we rushing?

This is a pretty important thing. I do not think there is a person in Canada whose relationship with banks and financial institutions is not somehow touched by this bill. There are few in my riding who do not have bank accounts, I will admit, but as the member for Winnipeg Centre reminded us, they are being served by other institutions that are gouging them, the payday loan companies that have sprung up like mushrooms to replace the banks that have left.

It is very unfortunate that we are not going to get enough time to debate this bill, because it is going to deprive Canadians of a really comprehensive and transparent review of our financial system, unlike the cursory and rushed treatment this bill unfortunately received in that other house, the Senate. We are talking about regulating this country's financial service industry, which employs thousands of Canadians and handles trillions of dollars in assets, and the Senate review of this legislation took three weeks from start to finish. The bill was introduced in the Senate on November 23 of last year and adopted at final reading on December 16.

Several questions arise from that. Why did it take so long to get here? We are in the middle of February and are now dealing with this in a rush because we have to meet a time allocation motion. It is almost three months since it was introduced and two months since it was passed in the Senate. Is the banking system therefore less important to Canadians than guns? Is the banking system less important than copyright legislation? Is the banking system less important than the Wheat Board? These are all things that went before it, and the banking system is thus apparently not seen as important, not as important to ordinary Canadians. We disagree.

Why the Senate? Is the government trying to make work over there in the other chamber? Is that really what is going on? To justify its position that the Senate is an effective place of sober second thought, does it have to find ways to introduce actual government bills in the Senate to give that chamber work to do?

If this is so urgent, why did the government wait so long even to introduce it in the Senate? The deadline has been known for years. The deadline was always going to be the middle of April of this year. Why has it taken so long? It baffles us.

We certainly have time to do this correctly, or we should have had the time to do this correctly. However, the government's mismanagement of this file, given that the five-year review was well known, has contributed to this rushed process whereby the government invokes closure for the umpteenth time and limits our job as parliamentarians to do a proper review of this important sector.

It is as if the government were governing on the back of a napkin. Every time we turn around, there is something that it has forgotten, something it has forgotten to do. This is another one. It forgot about this: “Oh, we better do it in a hurry. We have to get it through.”

We owe it to Canadians to address some of the real problems with the financial institutions, such as by protecting consumers from excessive user fees, not only ATM fees but also remittance fees on transfers that many new Canadians in the diaspora send to families they are supporting back home. Those remittance fees are huge and they are charged by banks and other financial corporations alike, and sometimes they amount to as much as 30%, 40% and even 50% of the money they send overseas.

Why do they have to send money overseas? It is because their families cannot be reunified here in Canada. We now have wait times of as long as 106 months between the time an application is made and a parent or a grandparent is permitted to come back to Canada, and it is as long as 33 months for spouses and children. All the while, the people here who have recently immigrated to Canada and are trying to reunite with their families are trying to support their family overseas by working in Canada and sending what little money they can. When the banks, the financial institutions, the payday lenders, whomever, take 30%, 40% or 50% of that money, it is a crime, and it is not something that the government has addressed.

We need to review the treatment of financial derivatives. Nothing in the legislation talks about that. It was speculation, as we saw in the United States, in particular, that provoked the financial crisis from which we are still recovering. These practices do not contribute to the economy but to the financial volatility that threatens to destabilize economies, and yet there is nothing in the bill to deal with that. The housing bubble in the U.S. created by those derivatives has caused ordinary citizens to lose billions of dollars in the value of their properties, in large measure as a result of banks and other institutions trading and speculating. Canadian banks were not immune from this: Canadian banks lost money on these derivatives.

We need to review mortgage lending practices, particularly in light of the comments made by Bank of Canada Governor Mark Carney, who said that record consumer debts are the greatest domestic threat to the country's financial institutions. Right now, consumer debt is 151% of disposable income, partly as a result of aggressive home equity loan marketing that has placed Canadians in vulnerable situations should interest rates rise. If interest rates rise, we are in for a huge collapse in our credit system in Canada. We do not want to see the disastrous practices witnessed in the United States' housing portfolio come here to Canada.

This is an inadequate measure, a missed opportunity to do better for Canadians. The consultation process has been pathetic, to say the least. Apparently, there were some consultations conducted by the government online. Some 30 people found out about it and submitted recommendations. The government cannot release the results of most of those to anyone because it forgot to get the required disclosures from those people for their information to be released. Therefore, we will never know what the feedback to the government was.

On our side, we will support the bill at second reading because we hope that the deficiencies in the bill can be corrected at committee. Some government members have actually said they want to listen and make amendments to the bill, where necessary, at committee. Thus far I cannot remember any bills coming to this House from committee with amendments. Maybe this will be the first. Who knows. I hope my colleagues on the government side will participate in the committee review of the bill in good faith to improve how our financial sector serves Canadians. This will be a challenge, given the time constraints imposed by the government today.

We owe Canadians this effort. I owe this to Canadians in my riding, as does every single member of Parliament here who represents all Canadians, all of whom will be touched by the measures that the government has put forward today in the bill.

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

Madam Speaker, earlier I mentioned tax evasion. The hon. member said that this bill is inadequate. The government prides itself on the fact that it is protecting Canadians from criminals, except when those criminals are diverting billions of dollars. I would like to read a quote from today's Journal de Montréal:

“Although securities offences may invoke serious harm for individuals, companies and society, the penalties will often be limited to administrative and regulatory sanctions such as fines,” the report states.

Does my colleague believe we will have time to explore the penalties imposed on people who are currently committing tax evasion?

[Mike Sullivan, NDP, York South—Weston, ON]

Madam Speaker, I suspect not. The bill is very weak in terms of dealing with banks that contribute to the harbouring of money overseas. There is a suggestion in the bill that the foreign subsidiaries of banks may now have to comply with Canadian regulations, but it is very sketchy. It is very difficult to read into the bill any kind of system like that being pursued very aggressively in the United States to chase the money and tax evaders. Even ordinary citizens in Canada are being chased by the U.S. government. None of that is happening here and one has to wonder why.

[Brian Masse, NDP, Windsor West, ON]

Madam Speaker, I had asked the parliamentary secretary, who defended the inequity that I believe is taking place, about the bonuses of the banks' CEOs. I understand that compensation is important and will take place. However, in the financial sector, in 2009 the top five banks paid $8.3 billion in bonuses.

I think Canadians want balance. I would ask my hon. friend whether he believes that is balanced. What should be done? Should there be more constraint, especially given the incredible amounts of user fees and costs that Canadians pay for these basic services?

[Mike Sullivan, NDP, York South—Weston, ON]

Madam Speaker, the Conservatives believe that the invisible hand of the marketplace will deal with things like the $8.3 billion in bonuses to executives in the big banks of Canada. That is an obscene amount of money. Not only that, those banks made $25.5 billion in profit, most of which has been squirrelled away for a rainy day.

I cannot remember the last time a bank opened a branch anywhere in Canada that would employ more people. Banks are not a part of the economic recovery, they are not part of the 600,000 supposed jobs that the Conservatives keep talking about. Those banks are making lots of profit. They are using it to pay their executives obscene bonuses and not to create jobs in Canada.

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

Madam Speaker, I would like to take this opportunity to speak in strong support of Bill S-5, the financial system review act.

In my time here today, I will focus on what our Conservative government has done to enhance protection for consumers of financial service products. This act builds on an already strong record of our government. From the outset, the government's approach to strengthening consumer protection has been straightforward. Canadians who use financial services are entitled to clear and simple information. They deserve to be treated in a fair and transparent manner.

Since forming government in 2006, our Conservative government has had a proven record of strengthening Canada's financial system. For instance, as part of Canada's economic action plan, we took action to better protect Canadians who use credit cards. We all agree that Canadians should not be forced to deal with hidden surprises on their credit card statements. That is why we took landmark action to force credit card providers to provide easily understandable information on credit card application forms and contracts and timely advance notice of changes in rates and fees. We also limited credit business practices that do not benefit consumers.

Specifically, we required credit card issuers to provide consumers with a minimum 21 day interest-free grace period on all new purchases when consumers pay their balance in full by the due date. We also required a minimum 21 day grace period on all new purchases in a billing period, even if the consumer had an outstanding balance. We moved key information, such as interest rates, grace periods and fees, out of the fine print buried in credit applications and contracts and into a prominent summary box so that consumers signing applications know exactly what kind of financial arrangements they are agreeing to without needing a magnifying glass and a legal dictionary. These pro-consumer measures are ensuring that Canadians have a clear picture of what they are signing up for and fully understand their rights and responsibilities.

It is little wonder that our government's measures have been so warmly received by consumer and other public interest groups. For instance, Casey Cosgrove, director of the Social and Enterprise Development Innovations' Canadian Centre for Financial Literacy praised them saying:

Understanding interest rates, fees and increases to monthly payments are key challenges many Canadians face when managing their credit cards. The measures announced by the government today will contribute to financial literacy by bringing clearer and more transparent information to consumers.

Additionally, Bruce Cran, president of the Consumers' Association of Canada, applauded the measures and said that all of the things in there “are actually just what we asked for”.

Laurie Campbell of Credit Canada also spoke highly of our actions. In particular, she highlighted the importance of the summary box I mentioned earlier. She stated:

The idea is that there will be a box somewhere on your statement, and it's going to show okay, this is how much you have outstanding, and this is your minimum payment on that amount outstanding... Any time we're trying to educate the public on how to manage their money better, on how to understand credit better, and how to minimize the amount of interest they're paying, it's a good thing. So this is a great step.

I am happy that our pro-consumer measures are in effect today. They provide Canadian consumers with precisely the kind of financial information that allows them to make the best choices to suit their needs. The reality is that there are more than 200 credit cards available on the market. While having so many choices ensures competition and varying interest rates, decisions about which card is best can be difficult without knowledge.

All consumers can only benefit by increasing their understanding of interest rates and the dangers of compound credit card interest. I am pleased to remind Canadians and members that important information on this very subject is available through the Financial Consumer Agency of Canada's website. The agency provides free comparison tables outlining the rates and features of numerous credit cards offered in Canada by a variety of issuers.

Our Conservative government has done more for small businesses and retailers who raised concerns about certain credit and debit card practices. Our Conservative government shared these concerns. One concern was the unpredictable costs associated with accepting credit and debit card payments, which prevented merchants from reasonably forecasting the monthly costs associated with accepting those payments.

That is why our Conservative government created the landmark code of conduct for the credit and debit card industry to better protect small businesses and retailers. Under the code, small businesses and retailers will be guaranteed clear information regarding fees and rates, as well as advance notice of any new fees and fee increases. They will be able to cancel contracts without penalty, should fees rise or new fees be introduced. There will be new tools to promote competition and the freedom to accept credit payments from a particular network without the obligation to accept debit payments and vice versa.

I am happy to report that small business has welcomed the measures laid out in the code of conduct.

Here is what the Canadian Federation of Independent Business had to say on the first anniversary of the code:

The Code's effectiveness has already been tested several times and CFIB is pleased to report that it has passed on every occasion. CFIB has used the Code to resolve issues on debit cards for e-commerce, disclosure of important merchant fee information, and exit penalties for fee changes in processing agreements. Merchants have new powers under the Code that have helped them achieve tangible results in their dealings with the industry. This simply wouldn't have happened without the Code.

Whether it is a question of saving for retirement, financing a new home or balancing the family cheque book, our government's commitment to improving the financial literacy of Canadians will do even more to ensure the integrity of our financial system. Canada has made the financial literacy of Canadians a priority. It has introduced legislation to create a financial literacy leader to improve financial literacy in Canada.

Bill S-5, the financial system review act, would build on the many pro-consumer measures we have introduced since 2006, including the three that I have already highlighted. The bill would more than double the maximum fine the Financial Consumer Agency of Canada could impose on financial institutions that violate a consumer provision, increasing it from $200,000 to $500,000. The bill would guarantee all Canadians, especially those who are most vulnerable, the right to cash any government cheque under $1,500 free of charge at any bank in Canada.

Informed consumers are the very foundation of a solid financial system. Canada's economic success is ultimately the sum of the financial success of all Canadians. That is why I am proud to support the financial system review act. It would further strengthen our Conservative government's commitment to this crucial objective.

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

Madam Speaker, if the bill is so important to the member's government, why was it tabled at the end of November and not in June when the Senate first sat?

As the hon. member for York South—Weston said, the government moved with quite alarming speed on other things, such as its crime bills and abolishing the gun registry bill, and yet the health of our financial sector and the health of our banks seemed to be on the back burner. It took the government until November. Why did it take until November for it to table this legislation in the Senate when it could have done it in June?

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

Madam Speaker, the truth is that the government has had a lot of important legislation come before the House since we were elected. There are a number of priorities that we have been moving forward on.

We appreciate the fact that we have a very sound financial system here in Canada and Bill S-5 would continue to keep Canada's financial system strong and secure. We have a lot to be proud of as Canadians with a great banking system.