Finance Committee on April 19th, 2007

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

In other words, the people from the banks talk to your clients to discourage them from using your service. Is that correct?

[Brian Crozier, Vice President, Business Development, UseMyBank]

If I could answer that question, I've contacted many of the largest billers in Canada and offered them the instant payment confirmation so that they could know that their clients have paid the bill. When they're spoken to, the banks have been able to put the clients off and give the answer that Peter has given here today.

Our company doesn't store the user name or password, unlike CashEdge or Yodlee or any of the other aggregators that are out there today. So our company is focused on offering instant online debit payments to billers and to merchants. The equivalent would be operating a store as a “credit card only” store and not having the ability to have a debit payment.

That's what we've been offering to merchants and retailers across Canada for over four years now. We've been stonewalled and have not been able to get at the domestic business and have most of the retailers that Peter would represent on board with UseMyBank.

[The Chair, Conservative, Brian Pallister]

We'll continue with Madam Wasylycia-Leis.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Thank you, Mr. Chair.

I thank you all for being here for this set of hearings. I'll break mine down into two questions, one for Evan on the whole question of access, and then one for Susan on the question of cheque imaging.

Evan, earlier, I think sort of jokingly, one of my colleagues said we're acting as if this is a public service--access to banks. I'm wondering how you understand financial services. I guess what I'm trying to understand is, isn't it a basic right of our society that one should have access to banking services at reasonable rates in their community?

[Evan Soikie]

The way I see it is, yes, I'd say it's a common right, but a lot of it has to do with the fact that it's just the way the banking system is set up. We don't have branches on every corner; we have ATMs on every corner. The banks save a lot of money by choosing to go the route of ATMs over paying for rent, paying for employees to fill those banks.

So this is the way the banks have chosen to set up their system. It does have a certain level of convenience to the consumer, but it also has a certain level of money-saving convenience to the banks. The interesting thing is that the banks have been withdrawing that service, and as I said, a lot of the people I've spoken to feel that those services are being withdrawn in the low-income communities.

So all of a sudden I find that I have people saying, “I don't have a car. I don't have a way of going three kilometres or whatever to my bank, and I'm forced to pay high service fees, which don't reflect anywhere near the cost of administration”--and that's the large concern.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

I'm glad you mentioned that, because that's the reality in my area, and I'm sure in many others in inner city communities, where banks have pulled out, closed their branches, and we are left with either payday lenders or white label machines. Both have access at exorbitant costs.

[Evan Soikie]

The interesting thing is that while the banks have pulled out from those areas, they've invested money in those payday lenders. So they're still making their money, only now they're charging up to 900% per annum interest on a small loan, which the banks at one time offered themselves.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

My time is limited, but Susan, you've raised a whole new issue for us. I don't think anybody's really quite grasped this yet. I think what you're trying to say is that with the changes in Bill C-37, we have now a system in place where we're opening up the possibilities for fraud to a great extent because there's no personal handling of cheques at all and there's been a mad rush to do electronic payments and cheque imaging.

What would you suggest we now do to try to fix this problem?

[Susan Ransom]

You're right.

Now my clients--large and small business and individuals--are open to excessive amounts of fraud because all of these fraud features are taken off their cheques, as opposed to in the U.S., as I said, where they're expected to put them on. What do we do? They're going to charge extra fees now for the return of cheques, when that used to be included in your bank fees. You got your cheques back. Corporations got their cheques back. Now they're not going to be getting their cheques back.

What happens when there's a cheque scan and it's incorrect? We have no recourse built into Bill C-37, whereas in other jurisdictions they have built-in indemnities and warranties and the ability to get re-credits quickly and within a standardized process.

We need choice returned to consumers so they receive their cheques or scans. We need fraud features returned to the cheques. We need indemnity attached to scanned cheques. There are going to be large fees charged. ATM fees are nothing compared to what they're going to be charging for all the extra features that you'll have to implement in order to prevent fraud in your company. You'll have to go to positive pay, maybe at some banks as much as $1 a cheque.

Right now to view your scanned cheque online, just for my TD Bank account it's $1.50 per cheque per view. The Royal Bank, the last I heard, is $2.25 per cheque per view.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

I'll do another one.

[Susan Ransom]

So your auditors come in and say they need to see the last 400 cheques from the last couple of years. It's going to cost you a great deal of money, or you're going to have to have been paying your bank for the cheque-scan database.

[The Chair, Conservative, Brian Pallister]

Thank you, Madam. I'm sorry, I have to cut you off again.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Thank you. That was very helpful.

[The Chair, Conservative, Brian Pallister]

We move to Madam Ablonczy now.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Yes, Ms. Ransom, with respect to Bill C-37 you said that people would not be getting their cheques back. In fact, people do have the option of getting their cheques returned to them under the system.

[Susan Ransom]

Right now, corporations--my clients, anyway--big oil and gas, government bodies, are getting either a disc with their cheque scans on it, some of them or they're not receiving their cheques back at all or they are receiving photocopies, in which case the bank is destroying the actual cheque, transmitting the scan of the cheque, then reprinting the cheque on paper and sending that.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

I'm not disputing any of that, I'm just saying that under the bill they are entitled to receive their actual cheques, so you might want to make sure your clients are aware of that.

[Susan Ransom]

They actually aren't. My clients are not receiving their cheques back, and they have asked.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

I'm not saying they're not, I'm saying they're entitled to.

[Susan Ransom]

They may be entitled, but the banks are not—

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

So you might want to let them know that.

[Susan Ransom]

I'm not agreeing.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

The other thing you should be aware of is that our system of government is different from the U.S. system. In the U.S., when legislation is put forward on matters like this, all the issues pertaining to the matter at hand are in the bill. In our system, we bring forward legislation and regulations that have a lot of the level of detail in that you say is missing, so you might want to look at all the regulations as they come out. I think a lot of the issues you mention will be in those regulations.

[Susan Ransom]

Will there be something in a bill to ask that the fraud features be put back on cheques? Corporations are now being put in the place of having extensive fraud they can't prevent.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

I expect that will be the case, but I urge you to look at them. Generally, as you know, regulations are posted so that interested parties can comment on them and give feedback that will be assisting the department in the final drafting. I'm sure you would be of assistance to the department if those concerns are not properly addressed in regulation.

I want to move to Mr. Woolford, because you said something very interesting. You said the cost and quality of the payment system need to be reviewed. I wonder if you could let the committee know a little bit more specifically what your concerns would be in that regard, just in a nutshell.