Finance Committee on Feb. 15th, 2007

[Terry Campbell]

There is no question that around the world you are seeing structural change in the industry. In terms of mergers and restructuring, there are different ways you can achieve the kind of clout you need internationally. As I'm sure you'll know, Mr. McCallum, these sorts of questions are so tied up with individual business decisions, but what I can say--

[John McCallum, Liberal, Markham—Unionville, ON]

I can understand there are divisions among the fraternity, so the CBA is limited in what it can say.

Let me change the subject, then. And thank you very much. I don't mean to interrupt, but I don't have much time.

[Terry Campbell]

Fair enough.

[John McCallum, Liberal, Markham—Unionville, ON]

I have one last question to Monsieur Dupont. What about the interests of consumers?

I note that in June 2006 there was a Senate committee talking about consumer-related measures. In light of that report, does this bill address consumer issues sufficiently? And what consumer protection challenges would continue to exist after this bill is passed?

[Serge Dupont]

There are a number of issues that we're working on outside the scope of this bill, issues that we'll continue to work on. I mentioned the voluntary code for electronic transactions, which is an important one, we think. The issue was raised of a common securities regulator. We think that is also good in terms of investor protection, and I think we need to continue to work on that. So there are a number of important files that we'll need to work on.

We're also continuing to work with the provinces, and collaboratively with the provinces, I might say, in further strengthening the ombudsperson services, which we think is an important part of the system.

And the FCAC is going to evolve over time. We think there is scope, for example--and I think the Senate committee indicated this, and other well-spoken individuals have mentioned this need--to ensure continued consumer education, financial literacy, and so forth. Those are issues that governments have to continue to work on.

This bill admittedly, in the consumer area as in others, does not do as radical a change as in 2001, for example, when the FCAC was constituted, but it does enhance disclosures and it does provide some tangible benefits. So it's one step along the way, responding in part to the Senate committee. There is more to come.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr.Chair.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. McCallum.

We have Mr. Norlock.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Thank you, Mr. Chair.

Thank you, witnesses, for coming today.

I've had numerous inquiries from constituents who are very concerned about identity theft, and in particular about someone stealing their mortgage. In one particular case—which was of national notoriety, of course—the bank was ready to turf the person out of the house because they were owed money, and it wasn't really that important who owed them the money: they just were owed money. Of course, because it became national in scope there were solutions made such that, in the end, the right thing was done.

Since we are speaking now, frankly, to the men and women who are your customers and who are our constituents, could you go through the steps that the banks, in cooperation with other institutions, have enacted to prevent this identity theft from costing innocent people their homes?

[Terry Campbell]

The first step we're taking is to strongly encourage the government to bring in legislation to make identity theft a crime. It is not now a crime. You can have the trunk of your car filled with the tools to break and enter, and that's a crime, but having the tools for identity theft is not a crime. We think the Criminal Code should be changed.

As for the mortgage issue, this has been an issue at the court level. The court that made some decisions in this regard about one of the small trust companies has reversed itself, and we think that's a good thing.

Remember who the bad guys are here. They have a high incentive to try to stay ahead of the police and of financial institutions. We literally work continuously with law enforcement, with the government, and with our regulators to try to stay ahead of them. We have very detailed security systems internally. We have systems that can detect if your credit card is being used inappropriately. We have very strong due diligence.

But this is a moving target. If you put the PIN in the right spot, the bad guys are going to be ahead. All I can really tell you is that we take it very seriously. We don't ever want to have a customer of ours have this kind of problem; we want to stop it before it becomes a problem.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

I realize that. As far as identity theft becoming a Criminal Code violation or a crime is concerned, most of those offences are covered under the fraud section, as you know. I can take under advisement, being on the public safety and international security committee, that this may be a good vehicle, but this is again placing the onus somewhere else.

What a customer of those who belong to your association needs to know is that when they're sitting in their home they don't have to be worried that the knock on the door will be someone from the bank coming to kick them out of their house. What have you done internally, perhaps in cooperation—I know in cooperation—with others specifically to make your customers feel better about knowing that you aren't going to turn on the customer you hold the mortgage on?

[Terry Campbell]

There is a whole series of due diligence steps, and we are continually reviewing them. That's the main point. You have to know who your customer is. That's the key to everything here when you talk about public security.

By the way, concerning the fraud provisions under the Criminal Code, their sphere is different from identity theft. One isn't the same as the other. Identity theft can lead to fraud, but identity theft by itself is not a crime, and it should be.

It all comes down to the due diligence that we put in place internally and with the land title system. We're encouraging governments all the time to keep the land title system up to date and as effective as it can be. Internally, it all focuses on knowing your client, and we're updating that all the time.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

The other question I had—and most of it was answered—related to the fees surrounding ATMs. One of the issues raised in the Parliament of Canada by various opposition parties—and sometimes we share some of the same concerns—is that other countries don't charge ATM usage fees to their customers. You've very eloquently stated why Canadian institutions do charge.

I suppose when you say we're one of the largest users of ATMs, that we have one of the world-class systems, we could argue that the reason we have this is that people pay such high user fees. Therefore, you're able to build it, and you keep building on that.

I think we need to be able to articulate appropriately, especially when folks are trying to pay their credit card balances or bill off before they have to pay interest. When people use the services that banking institutions provide, and they see such profits at the same time as they're struggling to make ends meet, you have to be very sensitive, not only to be able to articulate in saleable ways but actually to deliver vis-à-vis comparing the fees that people pay now, and to be able to show....

What I'm saying is that when we go to the gas pumps, we see the little scale from the gas companies that says exactly how much profit they make vis-à-vis the costs that are incurred in producing the product, and who's taking a bite out of that. I'm wondering if there isn't a better way that you could articulate to your clients, who are our constituents, to show them why those fees are as good a deal as you say they are.

Would you like to respond to that?

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Norlock.

Mr. Campbell, please answer quickly, because I would like get one more member in.

[Terry Campbell]

Very quickly, most other countries do in fact have fees, and Canada's are lower than theirs. Ours are lower than those in the United States and all the countries in the EU.

Sometimes a reference is made to the United Kingdom, where these convenience fees aren't charged. As I said earlier, we're number one in terms of ABMs. The United Kingdom is way down at number 22—it's an access issue here—and that gap is actually widening.

It's a fair point. Again, we would welcome you to either come down to Toronto or up to Montreal to tour the facilities and see how it works. We can come up and do more of a briefing. But the main thing is—

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

Thank you, Mr. Norlock.

Ms. Bell, I'm going to keep you to the five minutes. Thank you. I want to finish on time.

[Catherine Bell, NDP, Vancouver Island North, BC]

Thank you, Mr. Chair.

Thanks to the presenters today. I'm sorry I missed your presentations.

I would like to follow up on the line of questioning that Mr. Norlock just started with regard to the bank machine fees, and perhaps you can finish your response.

[Terry Campbell]

Thank you very much.

[Catherine Bell, NDP, Vancouver Island North, BC]

But I do have some specific questions. Because I'm with the NDP—

[Terry Campbell]

Yes, indeed.

[Catherine Bell, NDP, Vancouver Island North, BC]

—and your response to our suggestion that the fees be eliminated was very strong, I want to give you a scenario.

Not everyone lives in downtown Toronto and Montreal. A lot of us live in rural communities, in small places where we used to have banks. The banks were taken out of these communities, and consumers were left with no choice. You're talking about ATMs being a convenience. In some places they're not a convenience, and people who are struggling to make ends meet, counting their pennies, find it a real hardship to pay extra fees when they have no choice but to use an ATM. So that's one scenario.

You talked earlier about responding to the needs of consumers, and we're hearing from a lot of people about bank fees, so we're also responding to the needs of these consumers and bringing this issue forward. My question is, why do we have such fees when the banks are making such a huge profit, and people see that and feel that their $1.50 or whatever isn't going to hurt? Can you absorb those fees anywhere else? Basically you talked about being on the side of the consumer, but at the same time, you said that if they don't like having to pay those fees, then maybe they should look at going elsewhere.

[Terry Campbell]

Thank you.

Karen, would you like to answer?

[Karen Michell]

As we said and outlined in our paper, we have a system in Canada where ABMs are one of many options that you can use to access your funds, where you can pay for goods and services. It's part of the network that is offered to clients in terms of online banking, telephone banking, ABMs branch availability, and so on.

The other thing that's really been growing in volume over the past number of years is the point-of-sale network in Canada. It's interesting to compare that to the U.K., for example. Point-of-sale doesn't seem to be as big an option for consumers there, but here in Canada people are using it as a means to pay and also get back cash. So if you're using your debit card at the point-of-sale to buy your groceries in a grocery store, you can also get cash back right then and there. It's interesting, because merchants appreciate this option as well. For the small business, it's a cash-rich business and also a way of managing their cashflow.

In Canada, there's a system that provides options, choice, and convenience to customers.

But I would go back to what my colleague said earlier in terms of affordability. In Canada, there's also a whole range of service packages. The FCAC and banks encourage you to talk to them and look at the options that most suit your needs, your patterns of withdrawal, and so on.

[Terry Campbell]

In fact the FCAC, which is government regulated, has this as their motto: shop around. They have packages, comparative online tools, where you can go through and find out what works best for you. They have about 110 different account packages from 19 institutions.

[Linda Routledge, Director, Consumer Affairs, Canadian Bankers Association]

I want to add that in Canada we very much have a user-pay situation, where those people who use the banks' products and services pay for them. Compared to another country where they may not charge for a particular service, the cost of offering it is added on to the cost of other services. So some of your lower-income people may be subsidizing what other people are actually using. In Canada the user pays, so what you use is what you pay for, and that's all. There are low-fee accounts offered where ATM transactions are included for fees as low as $4 a month. So it's certainly affordable for most people.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Ms. Bell.

Mr. Campbell, before we wrap up, we've heard a lot of comments around the table. Of course banks don't always have a positive image, but I want to put on the record that I thank the Canadian Bankers Association for writing to Mr. Flaherty on February 13. I have a copy of the letter as well.

I want to put on the record that you're confirming that “Canada's banks do not refuse to pay a claim on a mortgage life insurance policy or a mortgage disability policy because the insured died or was injured while serving in Afghanistan.” Again, the banks are waiving the exclusion for soldiers serving in Afghanistan. I want to put on record that Mr. Protti also says in his letter, “Once again, let me state the banking's industry full support for our soldiers who are working to help the Afghan people rebuild their lives, and who are putting their own lives in jeopardy as a result.”

I think that's well put, and I want to thank the Canadian Bankers Association for that.