Finance Committee on Feb. 25th, 2008

[Marc Lee]

It's a very small amount applied to a very narrow base, so it's technically not a carbon tax—although we could perhaps quibble on that.

[Glen Hodgson]

They also tried to tell producers not to pass it on to consumers, which frankly is the wrong position. The whole point of a carbon tax is to get people to understand that whether they're buying a big car or small car makes a difference to the environment, and thus to shape consumer behaviour going forward.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

I have just one quick question.

[The Chair, Conservative, Rob Merrifield]

Very quickly, yes.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Could you tell us when the Conference Board is planning on coming out with their proposals in this regard?

[Glen Hodgson]

We've done a first briefing, which is on our website, and it sets out the elements of a national strategy for pricing carbon. We are creating a couple of forums right now, one on climate change adaptation, where we're getting some of the major emitters to sit in the room together with governments at all levels and talk about better practice. So we're really doing this on an ongoing basis.

I personally have been invited to be part of an advisory group working for the National Round Table, looking at what the optimal state would be for a carbon price rule down the road. I understand this work is going to occur over the next year and at some point the National Round Table will come up with its own report. So we will be attributed to that process.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Mr. Laforest.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Thank you, Mr. Chairman.

Good afternoon. My question is for Mr. Lee, but I would also like to hear Mr. Hodgson's opinion.

Mr. Lee, in your opening presentation, you said that your organization had chosen 2008 as the year to reduce poverty. Do you have any idea of the magnitude of the financial losses that the federal government is incurring because of tax havens? These amounts could be used to fight poverty, if we were to eliminate these tax havens. Do you have an idea of the amount of money at stake?

To my mind, the fight against poverty and tax havens are totally contradictory. Tax havens serve those who have a lot of money. If we are to fight poverty, we should make attacking these types of situations a priority.

[Marc Lee]

It's a good question. It's been a few years since I've seen an estimate on the amount of loss due to tax havens, and we don't include that in our alternative budget. But I would agree with you that we have been too much preoccupied with changes in the tax system that benefit the wealthy.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Don't you believe that if you designated 2008 as the year to fight poverty, it would be useful to look into this issue in a more in-depth manner?

[Marc Lee]

It's a fair comment, and we would certainly be prepared to do further research on this, but we are a small non-profit organization with limited resources and we do the best we can with a small budget and a lot of volunteer time.

But thank you for putting that on the radar. I will look into it.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Mr. Hodgson.

[Glen Hodgson]

I don't have much expertise in this area. The Conference Board of Canada has never conducted any research on tax havens. I do apologize, but this is not a topic on which I can offer an expert opinion to members of the committee.

[The Chair, Conservative, Rob Merrifield]

Thank you very much. With that, we'll now suspend and then we'll move our second group of witnesses in for this session.

[The Chair, Conservative, Rob Merrifield]

We'll call the meeting back to order pursuant to Standing Order 108(2) and the motion adopted on February 11, 2008, for a briefing on the annual report and business plan for the Financial Consumer Agency of Canada.

From the Financial Consumer Agency of Canada, we have Ursula Menke, the commissioner. It's good to have you here.

We have Jim Callon. It's good to have you here, as well as the director of the financial literacy program.

So with that, we'll allow you to take the floor and then we'll proceed with questions and answers. The floor is yours.

[Ursula Menke, Commissioner, Financial Consumer Agency of Canada]

Good afternoon, Mr. Chairman. I would like to thank you and the Standing Committee on Finance for inviting the Financial Consumer Agency of Canada to appear before you.

I am proud to say that I have recently been appointed commissioner of the Financial Consumer Agency of Canada, as of mid-December. I will do my best to respond to your questions.

To begin the discussion today, I would like to first highlight the mandate of the agency and then present to you some key activities that the agency is undertaking and that may be of interest to you.

The agency's mandate is to supervise and monitor the conduct of federally regulated financial institutions that take deposits and make retail loans. It is also charged with the mandate of consumer education in the financial sector.

Our work complements the regulatory framework that includes the Office of the Superintendent of Financial Institutions, which supervises the safety and soundness of our institutions; the Canada Deposit Insurance Corporation, which protects consumers through its insurance of retail deposits; and the Department of Finance, which is charged with the financial sector policy framework.

At its most fundamental level, the agency's role is to ensure and promote compliance with the disclosure provisions found in the various financial institutions' statutes. Our mandate does not give us a role in matters of redress. Parliament, in establishing the financial consumer protection framework, clearly separated individual consumer redress from enforcement of the law. The ombuds services were a response to Parliament's desire that all financial institutions belong to a third party dispute resolution body, to provide redress for individual consumers based on fairness.

As the market conduct regulator, our ultimate objective is to encourage a fair and competitive marketplace by ensuring that consumers have the information to make informed decisions.

Pursuant to our mandate on consumer education, the FCAC educates consumers on their rights and responsibilities when they are dealing with financial institutions. We provide Canadians with accurate and objective information on products and financial services, on a timely basis, in order to help them better understand and select products that will help them better manage their personal finances.

Our publications and online tools give consumers information on various products and financial services such as credit cards, mortgages, bank accounts, credit records, and payday loans.

By filling in the information gaps that exist in the marketplace, the agency provides Canadians with the tools they need to help them navigate a complex financial marketplace.

Demand for our services is growing. Every year more and more Canadians come to us to obtain information or to register a complaint about a financial institution. Since 2001 the agency has received more than 140,000 phone calls, e-mails, and letters from Canadians. Last year, in the 2006-07 financial year, we distributed 750,000 publications to consumers across the country.

Our website has become one of Canada's best sources of objective, up-to-date information on financial products and services. In the previous financial year, our website received in excess of 1.4 million distinct visits.

Through our outreach program, the agency is working with a growing number of partners in order to increase our reach and awareness of the agency among consumers. In 2006-07 our partnerships with the Canada Revenue Agency and Human Resources and Social Development Canada helped us reach over 8 million consumers directly, through inserts in GST rebate, child tax benefit, old age security, and Canada Pension Plan cheques.

Last year Parliament voted the agency $3 million over two years as an initial investment in improving financial literacy among Canadians, and in particular youth. We are forming alliances across the country in an effort to leverage these funds as much as possible in terms of spurring interest in investment and improving the financial capability of Canadians.

Canadians are expected to take charge of their financial affairs in a rapidly changing financial marketplace to invest for their futures and their families' futures and to accumulate enough savings to support their retirement.

To this end, Canadians need tools, information, advice and training to manage their personal finances with confidence.

With our funding, we are working with the British Columbia Securities Commission on a joint project to develop a web-based curriculum for high school students. We are piloting a project with George Brown College and the Ontario Investor Education Fund in presenting convenient mini-courses for college students. We are working with other government departments and Statistics Canada to carry out a national baseline survey to determine the financial strengths and capabilities of Canadians that will provide substantial data for focusing more efforts in this field.

We are also working in collaboration with a non-profit organization called the Social and Enterprise Development Innovation (SEDI) as well as the Autorité des marchés financiers du Québec in view of holding a second conference on financial ability. This conference will bring together experts and stakeholders to share knowledge, and develop the necessary networks to advance this program.

Lastly, the Internet will serve as the main platform to set up a resource centre that all of our partners and all Canadians will be able to use and share.

In closing, I would like to thank you for this opportunity to appear before the committee. I look forward to answering any questions you have.

I will be very pleased to answer your questions.

[The Chair, Conservative, Rob Merrifield]

Thank you very much for being here and for answering the questions.

We'll now move to the question and answer period, and we'll start with Mr. Pacetti.

The floor is yours for seven minutes.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chairman.

Congratulations, Ms. Menke. It's a new post. I hope you won't regret it in a couple of months.

I was listening to your brief, but I'm a bit surprised that you didn't mention anything about the crisis that's happening in the financial industry today. That's one of the reasons we asked you to come here. I don't think it's something you could ignore, so I'll ask you this question. How are consumers going to be protected with what's happening out there?

There seem to be losses. Day after day we're hearing about losses, and they keep getting revised, and they keep getting revised towards an upper amount rather than a lesser amount. The banks are under extreme pressure to keep reporting more and more profits, but if they're not there, somebody's going to have to provide them with those profits, and I think it's going to be the consumers, and probably Canadian consumers.

So how do we protect the Canadian consumer, what is your role going to be there, and what is your view in the future? I think that should have been addressed in the opening comments and not during my seven minutes, so if I interrupt you it's just because I want to lead you towards some quicker answers.

[Ursula Menke]

I guess I'd have to say there's only a part of that we can deal with effectively. There are certainly much broader questions. For example, part of the question you've asked related to areas that are significantly outside my mandate in terms of investments.

With respect to the mandate that I have from Parliament, what we do is ensure that the banks actually follow the rules. Most of the Canadian consumers you're talking about have ongoing relationships and they have contracts, of course, with their institutions. Those contracts will, of course, determine what the relationship is.

I didn't understand from the way the motion was originally drafted and the question that I saw...what you were looking for was the effect, I thought, on the consumers themselves. I guess the agency gets relatively little information on that directly. The most direct information we would get on the effect of what's going on in the market right now is from inquiries and complaints that we would have, and on the basis of that stream of information, I have to say at this point in time that there doesn't seem to be any effect upon consumers. We have noticed no increase in concerns related to credit matters.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

No, because I think this is an item that is in the news now, and we'll probably see it in a month or two when the policies start coming out in the banks. That's what I'm worried about. I'm trying to get ahead of the curve, and that was the purpose of my motion. What we don't want to see is consumers all of a sudden getting a letter saying, “Your interest rate is such and such” or “We've just made an adjustment to your credit card” or “We made an adjustment to your bank account that you've had with us for years.”

You say you have to make sure the banks follow the rules, but we all know what that means. Follow the rules, but based on what? Most consumers don't know what their rights are. How are they going to be protected? By the time you get one or two complaints, a lot of people don't even know they can complain. We get some complaints, but even for us it's hard to really pinpoint who we should direct that complaint to. I have a relationship with some of the bankers in my riding, but when it becomes high level it's tough. If it's on a branch level it's probably easier.

[Ursula Menke]

There are a couple of issues around there that you've identified. As I tried to make clear in my opening remarks, unfortunately what the mandate of the agency is is to apply the disclosure provisions, the provisions that relate to consumers and the consumer protection provisions. I could summarize those provisions by saying that they are essentially around the requirement for institutions to clearly inform and disclose to their customers what the relationship is. The agency does not have any kind of mandate in relation to actual levels and setting of levels, so there is nothing I can do with regard to changes in interest rates. All I can do is ensure that they followed the rules that were set out in the law and in the regulations.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Such as proper notice being given.

[Ursula Menke]

Exactly.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

How about rate fees, in terms of banking charges? Would that also be under your mandate?

[Ursula Menke]

I have nothing to say with respect to that either.