There has been much recent discussion that it is consumers who ultimately foot the bill for interchange fees, whether or not they use their credit cards. In addition, it appears that all consumers "subsidize" business and premium credit card users through overall increased prices of the goods and services which they consume. This practice combined with other practices such as cuts in the minimum monthly payment, over-limit and late-payment penalties, discounted introductory interest rates, cash advance cheques, cash rebates, payment holidays and countless offers in the mail and in stores, do the consumer no favour. Instead, they only confuse the ill-informed or already indebted consumer.
Credit products are increasingly complex. Unfortunately, a significant segment of the Canadian population faces challenges of basic literacy and, most likely, also challenges of financial capacity and financial literacy. We believe that it is time, where credit cards are concerned, to reduce the imbalance between large corporations and individual consumers. We must also raise the principle of lender responsibility, by this, we mean the responsibility of the financial institution which chooses to provide a new credit card to someone already carrying $40,000 of unsecured consumer debt, or is unable to alert a consumer immediately when he or she exceeds the credit limit.
Lending institutions often overlook their obligation to provide full disclosure, to provide sound financial advice and to assess the repayment capacity of their borrowers. Several witnesses whom you have heard during previous sessions of this committee have already demonstrated the problem. The system is complex and full of holes. Canadians are certainly heavy users of credit and debit cards. They use these payment mechanisms without really understanding how they actually operate and without always knowing what their rights and responsibilities are.
Credit cards and debit cards are electronic payment instruments, they are monetary transactions without paper currency or cheques. We have observed with alarm that in 21st century Canada, there's no recognition in the Currency Act of electronic money. It simply does not exist. Instead, electronic payment systems involve multiple stakeholders whose activities are each subject to different regulatory frameworks. No one player appears to bear overall responsibility. There must be clear and fair rules for all players in the system. At present, users bear the responsibility and risks related to electronic payments even though they themselves do not create these risks. In addition, the majority of the instruments governing electronic payments provide no penalties for non-compliance. The delegation of supervisory powers to the private sector leads to a democratic deficit since the interests of consumers cannot be properly represented as they are in a parliamentary or regulatory process.
Take the example of debit cards. Their use is governed by the Code of Practice for Consumer Debit Card Services, adopted in 1992. The application of this code is voluntary. And according to various surveys and studies, the financial institutions apply it partially and unevenly and consumers are left in the dark. Since Interac may change its business model and Visa and MasterCard may enter the debit card market, we believe it is imperative that governments ensure that Canadian users of debit cards are guaranteed a safe and fair environment.
I will now hand the floor over to Ms. Bose, who will share with you our conclusions.