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

[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.

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

Madam Speaker, does the member opposite believe that this legislation goes far enough in preventing the possible calamities that went on in the more recent past with banks, including banks in Canada, investing in speculative and derivative ventures that lost an awful lot of money for Canadian banks? Does he believe it is necessary to include that in this legislation and, if not, why not?

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

Madam Speaker, I think we all agree that Canada has probably one of the most stable financial systems in the world. The fact that we have a chance to review the financial system every five years is a good indication. If we look at what happened recently with the challenges around the world and their financial systems, how well Canada did is a testament to how strong Canada's financial system is as we continue to move forward.

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

Madam Speaker, a government report released under access to information and mentioned in the Journal de Montréal today says that our financial sector is vulnerable to organized crime. This is a government report. The journalist who got the report had to make an access to information claim.

Therefore, how would this bill answer the very serious questions of the involvement of organized crime in the financial sector? Are there any provisions in the bill for protecting ordinary Canadians from the activities of organized crime within the financial sector?

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

Madam Speaker, the financial system review act, or Bill S-5 , would continue to ensure that our financial system continues to be secure for Canadians and is a fundamental strength for our economy. If we look at some of the things the bill includes, it includes measures to update financial institutions legislation, to promote financial stability and to ensure Canada's financial institutions continue to operate in a competitive, efficient and stable environment.

The bill would also fine-tune the consumer protection framework, including enhancing the supervisory powers of the Financial Consumer Agency of Canada. The bill would also include measures to improve efficiency by reducing the administrative burden on financial institutions and by adding regular flexibility. These are just some of the things that the bill includes.

[Brian Masse, NDP, Windsor West, ON]

Mr. Speaker, it is good to have you here as we enthusiastically finish this part of the House of Commons day. This is an interesting debate that we have had with regard to the banks.

The first thing we want to note is that the bill s not thorough enough in its current form. We will support it to get it to committee but we will be looking for amendments. A lot of things are missing in this, such as an opportunity to address some of the unfairness that is happening in the Canadian financial institutions. I think that is important to recognize because it is actually affecting how we compete as a country. It is not just the individual elements related to user fees, ATM fees, credit rates and all those different things. It is also about how the use of capital is not being spread across this country, and where the priorities of the government are.

I would note that this industry getting this attention right now is rather interesting, coming late in the day, given the amount of profits and excess bonus fees that have gone to CEOs and the institutions, as well as the record tax cuts they have had. It is quite significant because it affects other parts of the Canadian economy. We lose money through our coffers.

This also gives an indication of where the priorities of the government are. It clearly has been to give the banks the upper hand, not only at the consumer level but also an economic advantage versus other industries that are suffering.

I would point out that we have not seen an action plan, for example, in the manufacturing sector. One of the things that is really critical to note is that in 2005, when the government came to power, we had a $16 billion trade deficit when it came to exporting and importing manufactured goods. So, a $16 billion deficit already behind, and now it has climbed to $80 billion. It is because of a number of successive trade deals that have taken place that have cost Canadian manufacturing, and we have not addressed many of the significant issues.

It is unfortunate because, as we were seeing the record tax cuts happening, we were witnessing hundreds of thousands of Canadian jobs being lost across Ontario and Quebec, whether it be in the forestry sector, the auto industry or the textile industry. We saw those industries, which were not profitable because of the downturn that took place and the lack of government policies, actually subsidizing the profits in the corporate tax cuts going to banks and other institutions.

As the corporate tax cut rate was being lowered and lowered, if companies were not making a profit it did not matter. While they were witnessing their opportunities diminish, the banks were getting benefits.

It is interesting that the oil companies and the banks in particular would get corporate tax cut reductions. The way it works in the United States is that it taxes on worldwide corporate profits. Therefore, our tax dollars out of Ottawa that were going to these profitable institutions that were making record profits were actually being taxed in Washington. It was getting our money. We were basically sending cheques from Ottawa to Washington. That is a strange economic way to improve a country. It is a strange way to actually benefit, even when we had the challenge in the United States with buy America.

We need to wonder what the Americans think about us over here, as we are actually handing them cash and, in the meantime, they are telling us that we cannot be involved in the buy America plan despite signing the NAFTA.

I would remind members of something that is very important. In a previous debate in this House, a member actually thought that the auto pact was in existence right now and that it came about because of the NAFTA. No. After we signed the NAFTA , one of the repercussions was that Japan took us to the WTO and the WTO ruled against Canada. We lost the auto pact. We lost all those jobs. We went from number two in the world in automotive manufacturing to number eight now, which is unfortunate. Those are value-added jobs.

When we see what is happening here in this sector, we need to wonder why we did not get certain things into the actual study. Part of it is that there was very little consultation. We note that there were only 30 submissions and 27 respondents with regard to this issue because it was not really promoted. If it does not get out there, people do not notice it.

That was the same type of approach we saw when the government did the deal with regard to the Canada and U.S. enhancement of the border perimeter security stuff that was recently announced. It was thrown up on a web site but there was no dialogue with the people presenting evidence and no expanding of the discussion.

It is the same problem we have had from this initial response. Hopefully, we will see that at committee because that is very important. It all depends upon the committee as whether there will be fairness with regard to witnesses, whether they will be heard and whether it will be done out of camera.

For those who follow the things that are happening on Parliament Hill, again today many committees met in camera, which means in secrecy, in private. Only the members who were at that meeting or another subsequent member sworn in later can go back and listen to that testimony again and get that testimony. Everything that is discussed in camera, unfortunately, never becomes part of the public record. We hope there will not be people in camera as witnesses, which would be unfortunate. However, I do not think it will go that far. We would like to see enough witnesses to ensure we will have proper hearings and a proper analysis.

One of the things I want to touch on is a consumer aspect because I have done a lot of work in the past on consumer issues. It is a good example of what we have addressed with regard to the changing world and our banking industry and financial institutions and privacy. In the United States, the patriot act was enacted and it is structured in such a way that when it goes to a company and asks for information about a person who has done business with that company, the company must provide that information to the U.S. government services and law enforcement. That information is used for whatever purposes. People do not have any ability to know that is happening because it is against the law for that company to disclose it.

Why is that important here today? Many of our financial institutions have data assembled in the United States. Therefore, because they are assembled in the United States, like my CIBC Visa, my Visa is now vulnerable to the patriot act without my knowledge and CIBC does not even know. It is used for whatever purposes. That is a good example of why we need an international treaty on the use of information. I do not think it is fair for Canadians to have their documents spied upon by Americans without a warrant. The way the PIPEDA works in Canada is that a warrant is needed to get that information. There is a check and balance through our justice system here. They can go after the cases where they think there are significant issues to look at but at the same time there is e the balance in review so tat people are not just having fishing expeditions done on them.

Why is that important? We have seen cases in the past, such as the Maher Arar case. He was deported but we did not know what information was assembled about Maher Arar. Some of it could have been his financial records or information. However, we had a lead government agency in the United States and a lead government agency in Canada conspire against a Canadian citizen and send him to a known torture state. We do not know, because of the patriot act, how all that took place and what information, if there was, was actually used. I believe we need an international treaty with the United States on how to share and disclose information because it has never been addressed. That took place in 2004. Our Privacy Commissioner has raised it, as have a number of different other people. It is important to recognize that.

Another important issue is the credit card fees. With regard to the honorary system we have now, it is simply outlandish. We cannot have this proprietary notion and predatory rates on credit cards, especially some of those that are the third party lenders. It is very significant. Some of them are at 25% to 27% and that is just wrong and should not happen. Some of the user fees, whether it be ATM or credit cards, all those are affecting our economy because the banks have not been re-investing that capital back into Canada to the degree where that money, if we stretch somebody's budget, would pay the rent, buy some clothes or send our kids to school, and would expand our purchasing power. We could do so on a more even basis if we were to look at those things because there is an economic opportunity for all of us.

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

Mr. Speaker, this failure of the government to deal with credit cards and other bank fees touches more than just consumers. I would like my friend to comment on how this would impact small businesses in this country as they deal with banks. I am aware of one small business owner in my riding who was just advised that the banking fees for a small business with a bank, because there is nowhere else to turn as they cannot just go someplace else to get this done, would go up by 68% in one day. How does that impact a small business' ability to stay healthy in this country?

[Brian Masse, NDP, Windsor West, ON]

Mr. Speaker, we have seen this in my community, in particular, in the auto industry, where they were denying loans. A lot of these companies were paying such high interest rates that they were not profiting, costing good Canadian jobs that were competing.

I did not say it in my speech, but it is important to recognize the history. The Liberal government and John Manley attempted to Americanize our banks. The Liberals said that they had to come together to compete in the global atmosphere to ensure we could compete in America and move some of necessary services and lending systems. The NDP stopped that. A small group of us at that time pushed back and stopped that from happening.

Therefore, when the banks talk about how great they are and what a great system they have for Canada, it is absolutely wrong. It is not true. They were forced to do that. In addition, lending practices still have not been fixed for small businesses, at all.

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

Mr. Speaker, although the legislation touches upon measures to stop tax evasion, we have said that perhaps we do not have enough time to explore the idea that maybe penalties for tax evaders should be enforced in a greater way or in a more severe way to recoup the money that Canada's economy loses every year because of tax evasion.

Would my hon. colleague address the issue of tax evasion in the legislation?

[Brian Masse, NDP, Windsor West, ON]

Mr. Speaker, tax evasion costs the Canadian economy. It costs us our ability to compete. It is simply nonsense.

We are moving toward more agreements that include tax evaders as part of our international treaties, for example, Panama. We are looking at doing free trade with Panama. Even President Sarkozy was very clear at slapping down Panama recently in terms of it being a tax haven.

Some new information is coming out about tax havens in a book entitled Treasure Island. It is unfortunate. What ends up happening is that if tax cheats are allowed, it costs ordinary citizens because we have to make up the difference.