Finance Committee on Feb. 25th, 2008

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Menzies, I believe you're going to share your time with Mr. Dykstra.

[Ted Menzies, Conservative, Macleod, AB]

I am indeed. I'm a very sharing person today. I like to make sure everybody has an opportunity.

Thank you, first of all, for your presentation. I'm finding this very fascinating. Congratulations on your new role.

Here is one thing, and this may be off topic from where Massimo's motion wanted to take us. But in hearing your presentation and in reading some of the comments, I'm very interested in how and if this may impact, or you may have a role in, white collar crimes with the financial institutions.

I have a constituent who has been trying to raise this very serious concern about brokers being able to encourage people to use in-house products, and about suggestions that these brokers may be getting kickbacks for selling more in-house products than they do a more expanded option of products. We're looking at encouraging provinces to sign on to a common securities regulator to try to police this. With our 13 regulators out there, we find it very disjointed.

I'd be very interested in your comments on that, if you see a role for yourselves in this or if you have indeed heard this complaint.

[Ursula Menke]

I can't speak to the specifics of the complaint, but—

[Ted Menzies, Conservative, Macleod, AB]

In general purposes. There's more than one.

[Ursula Menke]

I think one hears a variety of concerns around that, and we certainly do take them very seriously. With respect to the part of our mandate that deals with consumer education, we do quite a bit on that. We provide a variety of information--tip sheets, that sort of thing--and we are regularly expanding that information to give neutral advice to people.

One of the things we're going to be doing is a tip sheet in relation to financial advisers, giving consumers some advice about the types of questions they should be asking people who are giving them advice. We don't provide specific advice; we provide generic advice. Our objective is to improve the competitiveness of the system through having informed consumers. That's our objective on the consumer education side, and that's where we would be acting in relation to that matter.

[Ted Menzies, Conservative, Macleod, AB]

So informing.

Maybe I'm one of the naive ones here, but I wasn't aware of what your role is. How do we get consumers and taxpayers to avail themselves of this service?

[Ursula Menke]

Well, as I say, one of the main tools we have is our website. On the one hand, we have our publications. As I said in my opening remarks, we put out about 750,000 pieces of information in the last fiscal year. We continue to do that. Through the financial literacy money that we got from the government last year, we are also working on a program for financial literacy. We are working at a variety of different levels to expand the base of information and we do inserts so that people know about us and come to see us. We're doing a lot of various activities to ensure that we extend our reach.

[Ted Menzies, Conservative, Macleod, AB]

Thank you.

[The Chair, Conservative, Rob Merrifield]

Mr. Dykstra.

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

Thank you, Mr. Chair.

I have just a couple of quick questions. Well, one's a quick question. It probably has a long answer, so I'll save that one for my second question.

One of the interesting things that I noted on page 11 of the document you put out is the relationships that you've been able to build with the private sector and not-for-profit organizations, including the YMCA of Greater Toronto, an organization in Montreal, and an organization in Winnipeg. I'm from a smaller municipality--it's an urban municipality--but I wonder what types of partnership you were able to foster, such as those, or like those, in smaller urban centres or in more rural settings versus in the larger big cities.

[Ursula Menke]

Thank you very much for that question.

That's indeed a challenge for us, quite frankly. We're a small organization ourselves. What we're trying to do is expand these partnerships. Larger cities obviously tend to have more organized community associations, but we are definitely, under our financial literacy initiative, trying to expand our reach to community associations throughout the country. It isn't easy. We have to do it in many cases, particularly in smaller communities, one community association at a time. But we are on a path to doing that and expanding that very much.

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

That's good to hear.

I have one other question, and I know there's not a lot of time left.

A lot of what you do is obviously, even just in the title of the document, value for Canadians. With regard to a number of the organizations that report directly to the finance committee under the jurisdiction of the Minister of Finance, often the question we ask is, what value do you provide for the funding you receive? Are you able to measure that? You're an organization that receives some $8 million a year. Can you actually say, look, we actually saved taxpayers x amount of dollars this year, which assists us in terms of measuring up against the dollars that are invested in us as an organization?

[Ursula Menke]

That's always a very difficult thing to do, as you can appreciate.

One of the things we're going to be doing this year is that we have developed and we're in the processing of finalizing a very large baseline survey of financial capability in the country. We want to use that as baseline information and over the years be able to assess how our programs will have improved capability annually. That's one good way of doing it.

We have some indication from our partnership in British Columbia, for example, that education does make a difference. It's always nice to know. We all believe it, but it's nice to see some actual numbers on it.

We have some indication with respect to, for example, our compliance work, where there is a direct payment back to customers when mistakes are made. So that's a return of dollars into customers' pockets.

Those are all small indicators. We're trying to develop better and more consistent indicators over time, but that is a challenge for us.

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

Through you, Chair, as just a comment in regard to that, perhaps it would be helpful when the next document comes out if the suggestions that were made in terms of where that will go and how that will be justified could be included in the yearly report, at least for the next fiscal year, at least to get it started and see where it may go. It sounds as if you're on track to beginning to be able to do some of those measurables.

[Ursula Menke]

Thank you.

[The Chair, Conservative, Rob Merrifield]

Very good.

Now we'll move to Mr. Christopherson for seven minutes.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you, Chair.

Thank you for your presentation.

Right off the top, what are the most serious infractions you find during the course of your business?

[Ursula Menke]

I'm going to turn that one over. I haven't been there long enough to answer that one directly myself.

[Jim Callon]

The area in which we have the most challenge in terms of working with the institutions is disclosure, making sure the disclosure is clear, concise, and in plain language.

[David Christopherson, NDP, Hamilton Centre, ON]

Disclosure of what, precisely?

[Jim Callon]

That's particularly in credit products—mortgages, mortgage documents, lines of credit, and credit card documents.

[David Christopherson, NDP, Hamilton Centre, ON]

Okay, I'm going to push this just a little more. What sorts of things are you finding? What are the institutions doing that they shouldn't be?

[Jim Callon]

There are a couple of issues we've dealt with.

We have worked with the industry over the last two years to ensure that any consumer who is bound by a credit agreement is provided with equal disclosure in terms of any costs or fees and any changes to the terms and conditions of that loan. The industry practice had been that they would only provide disclosure to the primary borrower, which left secondary borrowers in the lurch in terms of knowing what was happening to the loan. That involved significant discussions with the industry, significant changes to their systems to be able to provide each person who's bound to the credit agreement equal access to disclosure requirements.

Another aspect we've dealt with deals with the marketing of credit cards, where there was a practice that the industry was starting to advertise credit cards with rates “as low as”. The consumer would be expected to think they could get the rate “as low as”, when in fact the majority don't get that rate. Again, it was a practice that was starting to permeate in the credit card business, and we worked with the industry to eliminate that type of practice in the marketplace.

[David Christopherson, NDP, Hamilton Centre, ON]

I'm just curious. As an infraction...I use that word, but it may not be the right word in your world. You talk about them working. I want to get clear how you go about enforcing what you do.

Ordinarily if there's an infraction, you advise people they've done something wrong, and here's what they need to do; and if there's any penalty attached, here's what it's going to be; and if you have an appeal procedure...that sort of thing. But what I'm hearing is that you worked with the industry to solve this, and it didn't require any regulatory change of any sort. Was there not a regulation in place that you could point to and say, “You have to do this”? I'm just curious as to why it was a matter of meeting with them and talking to them. That's all fine, but normally in enforcement matters that's not what you do. You discover an infraction, and you're on it.

[Ursula Menke]

I think our processes are exactly as you've described. When we talk about working with the industry, what we have, of course, is a discussion over exactly what the regulation means.

I wasn't there at the time, but it was clearly an issue of uncertainty over what exactly the interpretation of the regulation was. The discussions were held with the industry. They agreed with the agency's interpretation of the regulation and put into place the changes in their own processes, and the end result was that we got compliance.