How do you recoup your funds?
Evidence of meeting #10 for Finance in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was consumers.
Evidence of meeting #10 for Finance in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was consumers.
4 p.m.
Commissioner, Financial Consumer Agency of Canada
It's a formula. We borrowed the formula from OSFI, the Superintendent of Financial Institutions. We correlate that formula right through all the financial institutions. The biggest bank would pay the most, and the smallest the least.
4:05 p.m.
Conservative
4:05 p.m.
Commissioner, Financial Consumer Agency of Canada
Yes.
Just so you know, there is a basic fee that also covers insurance companies, because they have to file their complaint-handling mechanisms.
4:05 p.m.
Conservative
Rick Dykstra Conservative St. Catharines, ON
Very quickly, can you just describe the structure of your organization? You're an order in council appointment?
4:05 p.m.
Conservative
4:05 p.m.
Conservative
Rick Dykstra Conservative St. Catharines, ON
Governor in council; forgive me, it's my provincial background coming out.
The folks who are in the organization, you're responsible for them directly in terms of hiring them?
4:05 p.m.
Conservative
Rick Dykstra Conservative St. Catharines, ON
So once you were appointed, you actually created the organization through hiring.
4:05 p.m.
Commissioner, Financial Consumer Agency of Canada
Yes. My colleague had begun the transition to set up the organization.
I'll give you the rundown, for everyone's benefit.
In the spring of 2001, the governor in council and Privy Council Office ran an ad seeking a commissioner of the Financial Consumer Agency, to begin in the fall of 2001—just in case you may think these kind of systems don't work; I thought it worked. They ran the ad across the country and set up committees to interview for a commissioner.
The powers of the commissioner are the equivalent of a deputy minister or a deputy head. All hiring practices, all involvement in that hiring, are done under and according to the rules of the public service act. We have an expenditure budget of between $7 million and $8 million. We have about 39 employees.
We have a unique approach that I'm a hawk about. We have--and this will be in your materials—a very effective outsourcing operation, where we outsource our financial administration to OSFI. We joint-venture our call centres. We have probably close to seven outsourcing contracts that allow us to run very effectively. What we do is manage the contracts.
4:05 p.m.
Conservative
The Chair Conservative Brian Pallister
Thank you, Mr. Knight.
The hand signals are starting to take.
Madam Wasylycia-Leis, your round, seven minutes.
June 7th, 2006 / 4:05 p.m.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
Thank you, Mr. Chairperson.
Thank you, Bill, Jim, and Susan, for being here. I think it's really important that the FCAC is before our committee. We should make this a regular affair, because there's so much to cover.
I want to start with mortgage insurance. Obviously, as the federal market conduct regulator in the financial sector, you have something to say about this, or you have some responsibility, I would hope, or somebody has responsibility, for this whole area. We've had quite a debate in this committee now that the government has decided to open up mortgage insurance for competition but has no willingness to put in place any kind of oversight body or conditions or regulations. Some of us are worried about how the consumer will be protected in this.
How do you prevent things like collusion between lenders and insurers? And what's your role?
4:05 p.m.
Commissioner, Financial Consumer Agency of Canada
We're on the retail end. Let me try to take you through it quickly.
The people providing mortgage insurance, including CMHC, in essence are like the wholesalers. The retailers are the deposit-taking institutions, those institutions that are into the mortgage business.
I need to report to the committee that we had already done a review of the behaviour of banks around mortgages. When it came to the mortgage insurance, our examination found that they were basically disclosing the costs of the mortgage in terms of individuals who have to pick up the mortgage insurance. So they get a very good passing grade on that.
I note that now you're moving forward with new entrants into the business. As an agency--and I'll discuss this with the minister as well, and the department--our powers of overseeing market conduct on the retail side will allow us from time to time to report out to the department, to the officials and the minister, and to report out to this committee as we find what evolves in the marketplace. I can, and will, definitely report out on whatever the financial institutions are doing on their retail end. Since the legislation was just introduced, we'll move that up in terms of our business plan as one of our priority items going forward.
Secondly, I have a meeting in about ten days with the executive of the Canadian Bankers Association. I will sit down with them and talk to them about revising my business plan a bit to move up on the pecking order a review of what transpires. I will report that information out to the minister and to the committee as the regulator.
I don't regulate them directly, but I do oversee all of the retail end, so I will be able to pick up on what's happening on that side and inform members of the committee.
4:10 p.m.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
The study you mentioned that you did some time ago on banks and mortgages, is that available through the agency, or can we ask you to table a copy with our committee?
4:10 p.m.
Commissioner, Financial Consumer Agency of Canada
We don't name any individual bank under the law, but we certainly could release parts of it. It's on the website, I think.
4:10 p.m.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
The banks clearly have a real interest in opening up this area to competition. I'm trying to figure out what they have to gain from it, or how they can get away with saying that they will make sure that competition will protect the consumer and ensure that all regions are covered and all income groups are covered, when in fact the banks themselves have abandoned whole communities.
On what basis can the banks make this kind of assertion? How can they then be the main player in terms of mortgage insurance? Where do consumers turn, then?
4:10 p.m.
Commissioner, Financial Consumer Agency of Canada
Well, a couple of things. I don't know what the banks said, but I'll tell you...and by the way, it'll take a year or two, when you're doing new entrants and new products and so on, to have anything substantive. But if there are any gaps or left-out communities or segments of the market that this agency stumbles over, it'll be reported out.
There's the question of new entrants, and it's always complicated. A number of mortgage insurance providers in the U.S. market sometimes actually do work with particular niches in the market. I may be a little out of date, but there was one that at one time dealt with aboriginal peoples, and had an expertise there. If they become a player in Canada, that's what many people may be alluding to, that some of the choices of these people may happen.
New competitors should mean that there should be a price sensitivity, but being a regulator, I can tell you that anything I find going forward in the next two or three years, I'll share with you.
4:10 p.m.
Conservative
The Chair Conservative Brian Pallister
Madam Wasylycia-Leis, you have about one minute. I'd encourage you to leave time for a response, if you wish one.
4:10 p.m.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
Okay.
I'll give you one example that comes from a witness at our committee, Catherine Adams from the Royal Bank. She said, “If we had a supplier who said they only want to do the urban markets, we're not likely to invite them to join with us.” I just find that incomprehensible, because the Royal Bank, like all the other major banks, has abandoned whole communities--such as my own, Winnipeg North; you've been there, and you've seen the desertion, the abandonment.
Is there anything in the existing law to prevent this kind of abandonment of communities, or do we need to work at toughening up the law or the regulations to have something to make banks accountable to communities that have been loyal to them for all these years?
4:10 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Thank you.
I had a half-hour conversation with a client about a month ago on clearance rules. I'm going to use an example in order to clarify the issue. A credit card is due tomorrow, say, June 8. The balance is $1,000. It's with credit card X. You go into bank Y and pay your bill on the machine, on June 8. The money is taken out of your account as of when you do that transaction on that machine. However, that money is not credited to the account that you've just paid until a few days later because of “clearance rules”.
So the consumer has the worst of all possible worlds. He or she, being a good consumer, has paid their balance on the due date, which is what they're encouraged to do to avoid interest, when in fact they're going to get whacked for interest on their statement the following month. They get killed on the interest out of their bank account and they get killed on their credit card at a fairly high rate, and then they get compounded on the month following the month following.
It was a big shock when the constituent described it to me. I didn't quite realize that, with electronic banking, this was not an instantaneous transaction.
I wonder whether you've had any conversations with the financial institutions about this kind of issue, and also what it is they're prepared to do to stop gouging consumers on both ends of the transaction.
4:15 p.m.
Commissioner, Financial Consumer Agency of Canada
There are a couple of things.
First, maybe I'll help you with some questions that you could ask them if they come here. One, what kind of float are they creating in aggregate when they nail the individual consumer and then they float it for 48 hours on overnights? What are they picking up in cold cash? Because that could add up to a lot of money, if you take their whole marketplace.
Two, maybe they could, like the United States, break out with some clarity what they're making on both mortgage and mortgage insurance and credit cards in terms of non-interest income. That would perhaps be of interest to the committee and to consumers.
Having said that, in terms of our provisions under the cost of borrowing and so on, it gets into a grey zone once it goes into the payment system. I think one of the things that's going to happen for parliamentarians and consumer groups and the banks themselves is what kind of oversight or code of conduct, at minimum, people want to look at when it comes to that whole area of electronic commerce. This one fits into that.
I'll try to get back to you on this particular example, but I have never been clear on why they can't do it in a manner where there's not that gap.