Finance Committee on June 7th, 2006

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Thierry St-Cyr will be asking the questions.

[The Chair, Conservative, Brian Pallister]

That's fine.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Good day.

If I understand correctly, your agency receives complaints from clients of these institutions and your mandate is to protect these individuals. You investigate these complaints and ultimately make a ruling. Are your rulings legally binding and must financial institutions comply with them? Or, do you simply have the power to make a recommendation?

[Bill Knight]

Mr. Chair, under the act we actually have provisions to act. We have quite a range of powers. One is the power of examination. We have gone in on a number of institutions to do a special examination on particular behaviour and report out to the minister. Often, in generic terms, those reports would be in the annual report. We have the power under the act to force and oversee cost of borrowing provisions, as an example.

So people have a right to know the real cost of a loan, etc. There's a whole list within the act.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Suppose a dispute arises between a client and a financial institution, and the client turns to your agency for assistance. If your agency finds that the client's rights have been violated, must the financial institution comply with this finding, or in essence, is the agency simply recommending remedial measures to the financial institution?

[Bill Knight]

There's a couple of things. First let's deal with the issue. If the issue arises and it's at variance with the law, such as on lending practices, we then open a case and do an investigation. We can hold the institution accountable by due process. We issue a notice of violation, and the institution then gets a certain amount of time in which it can respond. I then take its response and the initial reports and make a decision, like an administrative tribunal, on the case. That's one.

Now, in a number of instances it is shown that there is no at variance with the law, but--and this is key, in my mind--the individual may still face redress issues. So they will go through a redress ombuds issue with that institution, or they can seek legal restitution. I don't deal with that.

The third factor--and we had a case lately that we've followed up on--is that under section 17 of the act, the individual consumer will be frustrated that, often, like the Competition Bureau, we're to deal with the regulatory issue, not the redress issue. Therefore, sometimes they would like to see their file, and under section 17 of the act, I cannot just hand over a file that's been developed on this issue.

Bear with me, this is difficult.

But hope springs eternal. I advise the consumer that they can apply under access to information for their file. There are privacy laws and safeguards built in, but the access to information can often result in them getting their full file.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

You've discussed briefly the means available to you. What recourse do you have in the event of non-compliance with the financial institution's ethical practices code? If you determine that an institution is not abiding by its ethical practices code, what recourse is available to you, other than making a finding or a recommendation to that financial institution?

[Bill Knight]

Yes. Actually, once a year there is a reporting out of an accountability statement by each institution that has asset equity of around a billion dollars. That's the big five, quite a number of the major institutions. In those reports, I check that they have certain fundamental information in them for consumers, for Parliament, for everybody. In reviewing that, if I think they're off base with the rough commitment they've made, I can report it out in the annual report. I can report it out in other manners.

The real difficulty is that in a number of instances, after the investigation, it doesn't turn out to be the case. But if it's substantive and systemic, I would report it out.

[The Chair, Conservative, Brian Pallister]

Very briefly, Mr. St-Cyr.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Therefore, all you can do is report the situation.

What is the most common type of complaint received by your agency?

[The Chair, Conservative, Brian Pallister]

In summation, Mr. Knight, because Mr. St-Cyr's time has been used up.

[Bill Knight]

Just quickly, in the report we handed out there are about five areas. You'll see complaints about access to basic banking, you'll see complaints about credit cards, cost of borrowing rules, whether it's cards or mortgages, and then we can go on from that.

I'll come back in another angle and answer as we go along.

[The Chair, Conservative, Brian Pallister]

Mr. Dykstra, seven minutes, sir.

[Rick Dykstra, Conservative, St. Catharines, ON]

Thank you, Mr. Chair.

Through you, Mr. Chair, to Mr. Knight, what do you think the difference is between the FCAC and FINTRAC? I'm having a really hard determining the differences between the two organizations.

[Bill Knight]

FINTRAC is fundamentally a....

I'm gong to start showing my age here. At the very first committee ever held in the Department of Finance, of all of the industry, I was there. I was there with our then CEO, a good Manitoban by the name of Brian Downey, when we began the first moves to track where money was moving between financial institutions. The reason at that time was to start getting at the whole money-laundering issue.

FINTRAC focuses on strictly following money. When you cross the border and they ask how much cash you have on you, if you say more than $10,000 you're going to be registered. FINTRAC's mandate is to be a key component of the drive against money laundering. I don't do any of that. I don't work with white collar commercial, or the RCMP, or CSIS in those areas.

So their mandate is around transactional business that involves money. Mine is related to large retail institutions and their behaviour on the retail end, and how they interface with the individual consumer.

I hope that helps.

[Rick Dykstra, Conservative, St. Catharines, ON]

That helps, yes.

Before the former Minister of Finance created the organization and appointed you, how did we determine...or how did we deliver this service? How was it taken care of? Where was it in the Department of Finance?

[Bill Knight]

It was all over the place. Many aspects of it did not exist. Some of it was with OSFI. A lot of it is brand new. It's been new for about four years.

They brought a focus to it and they consolidated it into one entity, after the MacKay task force report, to give it more significance.

[Rick Dykstra, Conservative, St. Catharines, ON]

You do a lot of checking of things that have happened already. I note that one role of the regulator is to comply with the provisions in numerous or various federal acts. The Bank Act is being reviewed, and it's to take place further on in the year. Do you actually make proactive recommendations on changes, or issues, or continuance of good practice to the Minister of Finance, particularly on the Bank Act?

[Bill Knight]

To go right back to my background--running operations in my father's store at 16--I'm really anti-clutter. What we will be doing, in terms of both regulations and legislatively, is give Finance a whole range of cleanup items that they should look at, from a policy point of view, to bring before you.

I'll give you an example with regard to the Canadian Bankers Association. It's turned out, in the first four years of the cost-of-borrowing regulations, that there is some confusion around individual regulations. They have already put in a submission, which I believe is available to you, on cleaning that up. I actually, in spite of being a regulator, agree with them in terms of taking the time to bring clarity to a couple of those provisions. So we do that.

[Rick Dykstra, Conservative, St. Catharines, ON]

When was the last time you actually met with the Minister of Finance to have a discussion with him or her—I guess it's “him”, in this case—in regard to your work?

[Bill Knight]

We usually meet about twice a year, but I meet with the officials constantly, and with the office. Minister Flaherty and I are organizing to get together. We agreed to leave it alone until the budget was taken care of. It sounds like we'll be getting together pretty quickly.

[Rick Dykstra, Conservative, St. Catharines, ON]

Good.

I have a minute left?

[The Chair, Conservative, Brian Pallister]

A minute and a half.

[Rick Dykstra, Conservative, St. Catharines, ON]

You noted how you actually recoup the costs that you incur as an organization. I take it from your introductory comments that it actually doesn't cost the taxpayer a cent for you to be in existence.

[Bill Knight]

That's right.