Thank you.
The Canadian Consumer Initiative is a coalition of six major consumer organizations, including the Alberta Council on Aging, Automobile Protection Association, Consumers Council of Canada, Option consommateurs, Public Interest Advocacy Centre, which I represent, and the Union des consommateurs. CCI provides advice and assistance to the federal government to help safeguard consumer interests.
CCI has come before you today to ask this committee to consider embedding a framework for electronic payments into the Bank Act. Although this suggestion is not presently in the form of an amendment, we hope the committee will consider amendments at this late stage in order to benefit banking customers, which includes most Canadians.
Electronic payments include such systems as debit cards, both at ATMs and at point of sale; pre-authorized withdrawals and deposits into consumer bank or credit card accounts; credit card purchases, both at point of sale and without presenting the actual card, such as on the Internet; and new payment mechanisms through the Internet, in particular PayPal, electronic transfers of money through Interac or other online services such as online investing, e-mail money transfers, and soon mobile commerce through cellphones.
The Canadian banking system relies to a remarkable extent upon self-regulatory mechanisms for electronic payments. For example, the CPA has rules regarding pre-authorized debits. However, the code's provisions are not well known. For example, a financial institute can cancel a false debit pre-authorization through CPA regulation H-1. But because consumers are often unaware of the provision, they may believe they are responsible for the transaction and pay for the mistake.
In addition, consumers are only responsible for $50 maximum liability in unauthorized credit card transactions. But this rule is usually a provincial requirement. It is supplemented by no liability policies of major credit card companies. This policy is not contractual, and it could be changed at any time.
Regarding debit cards, Canadians made nearly three-quarters of a billion ATM transactions last year, but all of them were under the CPA's Canadian code of practice for consumer debit card services, a voluntary code. Although consumers are theoretically exempt from liabilities associated with unauthorized debit transactions, they may become liable for debit fraud through an innocuous admission to their bank that their spouse at one time knew their PIN number.
The CCI studied electronic payments in early 2006. We produced a report, which has been provided to the committee. That report concluded that the present hodgepodge of regulation and voluntary codes is inadequate and that Parliament should instead consider legislating in a holistic manner. That is what we are urging the committee to try as it considers Bill C-37.
The Canadian Consumer Initiative believes the following principles would provide a more predictable and effective electronic payment system in Canada, one that's consumer friendly and economically efficient.
The first is universality; it should cover the broadest range of payment technologies. Second, neutrality: all technologies should be regulated by similar rules, if possible. Third, security: payment technologies should be secure. Fourth, accountability: the risk should be supported by the party who creates it. Fifth, transparency: rules, roles, and prices should be transparent to all parties. Sixth, liberty: payers should be allowed to choose the payment technology they prefer. And finally, enforceability: parties should be able to ensure that the framework is effectively enforced.
Changes to the Bank Act to embed this electronic payments framework could be considered at this time. CCI's analysis reveals that this might be achieved by regulation made pursuant to section 410--specifically paragraph 410(1)(c)--of the Bank Act, which gives banks, with ministerial approval, the power of collecting, manipulating, and transmitting information that is primarily financial or economic in nature, as well as designing and implementing information systems to do so.
Subsection 410(3) gives the Governor in Council the power to make regulations about financial information. Therefore, the Governor in Council may have power to regulate the mechanics of electronic payments under this section.
Any information disclosure or other necessary requirements of the framework could be authorized pursuant to either sections 459.4, which is consumer information regulation authority, or section 978, which is general regulation power under the Bank Act.
Although we have not had time to draft possible regulation wording for the committee, we highly recommend the U.S. Electronic Fund Transfer Act. It has since 1980 been in place in the United States, and with appropriate modifications could serve as a basis for drafting a coherent Canadian electronic payments regime inside the Bank Act.
Thank you. I'd be happy to take questions at the end.