Finance Committee on Sept. 24th, 2012

[Ted Menzies, Conservative, Macleod, AB]

Well, you're right, Mr. Caron, they are very complex issues. But first of all—and this is a bit of my own viewpoint, of course—we need to give Canadians, and at a very early age, I would argue, the understanding of the benefits and the responsibilities that go along with a credit card and with a debit card, and the understanding that they are going to be required to plan for their own retirement, certainly not 100%, but certainly, I'd say, start planning as early as you can.

There are a lot of people who want to be investors in the stock markets and want to have more expertise in their investments. We encourage those people to seek good advice before they do that. I don't think we're at that level yet. We look at this financial literacy leader. We're starting here. I think this leader is going to work with the education process and make some decisions on where we insert this into the educational system, into the curriculum, because there's a real contest for where the room is in the curriculum. Teachers are going to say to you, “I don't have time to put this in my curriculum—I'm busy already”.

So I think you're one step ahead of us.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much. I was actually going to bring up curriculum in my second question.

The problem I have with this whole philosophy is we seem to be much more concerned about turning people into good consumers for the financial industry, be it banks or other financial institutions, instead of actually getting down to the nitty-gritty of the financial literacy problem.

You mentioned curriculum. That is very much a key issue. When I was in my third year of high school—which is equivalent to grade 10, I believe—we had what was called an economic education program. It covered things like credit cards and bank accounts, but it also dealt with fundamental issues facing people such as unionization. We looked at everything from a macroeconomic perspective, taking a lot more into account than just financial markets.

Instead of strictly limiting the financial literacy discussion to financial markets, pensions and other really specific issues such as credit cards, don't you think we should widen the scope and talk about economic education in general? Taking that approach, we could work with the provinces to help them develop a curriculum component possibly for primary students, but especially for high school students, to educate all young people about the complexities of economics, beyond just the financial dimension.

[The Chair, Conservative, James Rajotte]

You have about 20 seconds for a response, Minister.

[Ted Menzies, Conservative, Macleod, AB]

I certainly can't disagree with you: that needs to happen. But as I say, I think you may be one step ahead of us. I appreciate your enthusiasm. Let's get this financial literacy leader in place to allow that person to work with the FCAC to develop plans for how we educate young people, for how we educate people who weren't taught by their parents about savings, about how to invest, about what types of bank accounts have lower costs, and those sorts of things. There's a myriad of things we can look at, and I think the realm of possibility is quite broad for this leader to be able to develop.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Hoback, please.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

First of all, I also want to congratulate you, Chair, on your reappointment. Maybe re-election is the proper word.

I want to also welcome all of my colleagues back to the finance committee. It's great to see you here. It sounds like all of you had a very busy summer, like we did.

Of course, Minister, it's always great to have you in front of the committee, because you've always brought something productive and constructive to the committee when you've brought something forward. I think you're following through on what your reputation has become, and that is one of a very hard-working minister who's looking forward and trying to help Canadians. You're definitely doing that with this type of legislation.

You touched upon mortgages. I'm going to take you back to mortgages because I think—you said it here earlier today—it's probably one of the biggest purchases a family will make, and it's one of the things that is probably the most confusing. When you're looking at purchasing a mortgage or purchasing a house and taking on a mortgage, there is a variety of options. There's a variety of repayment schedules and repayment terms. There are implications if you decide to sell that house down the road. For example, if you have a floating rate and you see the rate increase, and all of a sudden it goes up by 1%, 2%, or 3%, it impacts that household.

Can you just elaborate on the mortgage side of things, as to how you're going to improve people's knowledge when they take on a mortgage and what the options are for them? Again, what can we do to make them make better-informed decisions on whether to lock in a mortgage and stuff like that?

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Hoback.

We indeed have worked with mortgages over a number of different sessions, starting in 2008, making sure that people fundamentally understand the responsibility they're taking on. We introduced a mortgage code that helps people better understand what charges can be associated with this.

The prepayment charge is a simple one. Everyone hopes to get into the situation where you actually can make an early payment or a prepayment, but people hadn't understood when they signed the mortgage how much that prepayment penalty might be. So part of the code is about making sure that it's up front and articulated to the mortgage holder as to what those costs may be.

The mortgage provider must talk about a dollar amount of the prepayment as well as, on a yearly basis, what it costs to make those prepayments, and must give an explanation of how the prepayment charge is calculated—there are different mechanisms for that—as well as a description of how the lender calculated that prepayment. As I say, there was a myriad of those. The other simple one is that we now require mortgage providers to have a website calculator so you can look at that.

But in the overall mortgage aspect, we've also made sure to encourage people to have a larger down payment. We've reduced the amortization period to make sure that people are capable and take the time to save a little more money before they actually take on the mortgage liabilities.

[Randy Hoback, Conservative, Prince Albert, SK]

I think it would be fair to say that if that type of education had been provided to American consumers back in 2004, 2005, 2006, or 2007, there might be a different market down in the U.S.

Having said that, we have a better banking institution that uses a totally different way of approving a mortgage and whether the person qualifies for a mortgage. As far as the involvement of the banks goes, do you see good uptake? Do you see them participating in this type of program? I think it's in their best interests, but do they see that? What do they tell you when you're looking at bringing this forward?

[Ted Menzies, Conservative, Macleod, AB]

Referring to the financial literacy, yes, absolutely. They do more than I even was aware of. Ms. Menke can probably articulate it a little better than I can, but I actually sat down with some of the banks and asked them to tell me what they're involved in.

They're spending millions of dollars on financial literacy to their customers already, so that's a good start, but we're certainly hoping we can focus all of that. We're not discouraging them from spending money, from telling their customers what products are available, how to protect themselves, and what's the lowest cost, and also focusing the overall direction so that it's a concerted effort.

Ms. Menke, you may have a further comment on that.

[Ursula Menke]

Indeed, we've taken a multi-pronged approach just because it is such an important product for most Canadians. We've actually tried to expand the potential area for delivery of that kind of learning.

In the last couple of years, we've spent a lot of time with mortgage brokers and realtors to make sure they have the information that we have so they can present it to their clients, especially first-time buyers, who really are fairly new to what a mortgage means, and to make sure they have the tools to help those clients understand what they're getting into—with the mortgage brokers and the realtors in both cases—and that has helped a lot.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Hoback.

I understand, Minister Menzies, you have somewhere else to be very soon, but I understand your officials and FCAC will stay. We thank you very much for being with us here today.

[Ted Menzies, Conservative, Macleod, AB]

Thank you.

[The Chair, Conservative, James Rajotte]

Perhaps I will just suspend for one minute, and then if there are any other officials who do want to come forward, either from FCAC or the Department of Finance, we will do that.

[The Chair, Conservative, James Rajotte]

We do have another 40 minutes.

Starting off for his round will be Mr. Mai.

Five minutes.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you, Mr. Chair.

Like everyone else, I want to congratulate you on being elected committee chair. It's always a pleasure to work with you, and I'm also very glad to see my colleagues again. I know that we work very hard in the Standing Committee on Finance, but we can also enjoy ourselves.

Bill C-28 is very problematic to me. The report put forward 30 recommendations, good recommendations, but only 1 of them was implemented. My colleague Ms. McLeod asked the Minister of State for Finance whether the recommendations would be followed. He said that the leader has the option of putting those recommendations in place, but is not required to do so. One of our problems with the bill is just that: the government put together this piece of legislation, but did not use it as an opportunity to set out a real strategy. And that's a shame because I wholeheartedly agree that it is important in terms of financial literacy.

Mr. Chair, I also want to commend you on all the work you've done on this. Unfortunately, all this bill does is establish a new position, not the strategy that was recommended. Above all, the bill doesn't provide for the advisory council, whose makeup is supposed to be somewhat diverse, if I'm not mistaken. Its members could be drawn from the educational sector, the working world and the financial sector.

There is one recommendation that I think is just fantastic, but unfortunately it's not in the bill either. I'll read it quickly: “The Task Force recommends that the Government of Canada make financial literacy training programs for young Canadians eligible for funding through the Youth Employment Strategy.” What a shame that's not in the bill.

Another prime example is the Urban Aboriginal Strategy, which would make financial literacy training programs for young aboriginal Canadians eligible for funding. The recommendations also address immigrant education.

I would just like the officials to confirm something for me. Does this bill provide for a group that could put a financial strategy in place, or does it just create a position?

[Ursula Menke]

I will start.

Since the agency I head will oversee this position and since we are responsible for implementing this legislation, naturally we have started planning and have been using the 30 recommendations in the report you mentioned as a guide. Planning is already under way. Obviously, nothing has been finalized given that we don't have a leader yet. Nevertheless, we do have plans to examine these issues further.

First, you said, for instance, that there were many recommendations that don't apply to us directly, that don't come under our agency's mandate. In fact, we have set up an interdepartmental committee to address those very matters. The committee should be holding its first meeting soon to begin discussing the recommendations in order to move forward.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

I really admire the work your agency does, and I imagine you receive a lot of accolades. You have my full confidence. But the problem before us calls for a new structure, a new strategy. All we have at this point, though, is a new person. We don't even have a clear definition of what that person is going to do. For instance, we don't have a definition for financial literacy. Someone who comes purely from the financial sector might say that financial literacy is merely teaching people how to invest in markets, like the stock exchange. The recommendations, however, apply to other situations. That is why we take issue with this piece of legislation: it doesn't go far enough, it doesn't set out a comprehensive vision, even though the recommendations are there.

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Are there any comments?

Mr. Rudin.

[Jeremy Rudin, Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance]

I would simply say that the bill addresses the creation of the financial literacy leader. That is entirely in keeping with the task force's first recommendation. As you pointed out, there are numerous other recommendations, but they don't require any changes to the legislative framework in order to move forward. For the most part, they involve decisions with partners, such as provincial governments, and administrative government decisions. This isn't a lengthy bill. It deals solely with the task force's recommendations, in other words, those instances in which legislative support was deemed necessary by the government.

[The Chair, Conservative, James Rajotte]

Thank you.

I'll go to Mr. Van Kesteren, please.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thanks to all of you for appearing before this committee on a very important bill. I want to follow up on Mr. Adler's question.

Mr. Rudin, maybe you could answer this question for me. I think what he was trying to say was that the suggestion was made at the last election that credit cards should be capped at 5%. I want to get your opinion—and anybody else who wants to can jump in on this too—as to whether that would curb public spending in general. Or would it possibly exacerbate the problem if consumers suddenly were presented with a much lower interest rate whereby they would use the card even more?

[Jeremy Rudin]

Thank you.

I can just expand briefly on what Minister Menzies said. The government's approach in this regard, which is very much its approach in the financial sector overall, is to avoid regulating prices or rates and to encourage competition, clear disclosure, and now the third leg of that, which is to help consumers as much as possible make those choices in an informed way by supporting financial literacy.

It's the government's position that capping fees or regulating rates in a variety of areas is more likely to be counterproductive and that providing consumers with choice and the ability to make those choices is the most effective way.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you.

It was touched on very quickly, but I just want to get something a little more concrete: where will the funds for the financial literacy leader come from?

[Jeremy Rudin]

From the consolidated revenue fund, so from the government itself.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Okay. Have they been budgeted for?